Technical Analysis – Gold consolidates as downtrend stalls on daily chart
January 10, 2014 9:27 am
Gold started the New Year on a firmer footing after bouncing off 6-month lows (1182.16) hit on December 31.
Looking at the daily chart, gold has spent the last 10 days consolidating and hovering around the 23.6% retracement Fibonacci level of the move down from the October 28 high (1361.60) to the December 31 low (1182.16). It is also currently finding support from its 20-day moving average (which coincides with the 23.6% Fib).
Gold has been bearish throughout 2013 but this downside momentum has stalled and the trend is directionless, as indicated by the ADX which is very low and below 25 (meaning a weak trend).
Price action has broken above the downtrend line (October – December) which suggests there has been some buying pressure. Also the RSI and stochastic have both risen above their respective downtrend line.
Gold would need to clear 1249.83 (38.2% Fib and January 6 high) before targeting 1271.35 (50% Fib) and 1292 (61.8% Fib).
However since the medium-term trend is bearish, these higher levels would come under more selling pressure and would be good opportunities to go short, with targets at key psychological levels of 1200 and 1180.
The US nonfarm payrolls due later in the trading day could provide a catalyst for a large move today and would likely cause volatility.
Gold started the New Year on a firmer footing after bouncing off 6-month lows (1182.16) hit on December 31.
Looking at the daily chart, gold has spent the last 10 days consolidating and hovering around the 23.6% retracement Fibonacci level of the move down from the October 28 high (1361.60) to the December 31 low (1182.16). It is also currently finding support from its 20-day moving average (which coincides with the 23.6% Fib).
Gold has been bearish throughout 2013 but this downside momentum has stalled and the trend is directionless, as indicated by the ADX which is very low and below 25 (meaning a weak trend).
Price action has broken above the downtrend line (October – December) which suggests there has been some buying pressure. Also the RSI and stochastic have both risen above their respective downtrend line.
Gold would need to clear 1249.83 (38.2% Fib and January 6 high) before targeting 1271.35 (50% Fib) and 1292 (61.8% Fib).
However since the medium-term trend is bearish, these higher levels would come under more selling pressure and would be good opportunities to go short, with targets at key psychological levels of 1200 and 1180.
The US nonfarm payrolls due later in the trading day could provide a catalyst for a large move today and would likely cause volatility.
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