Hawaii Six O - Gary Wagner
Gold Breaks Below Apex Of Compression Triangle
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This week’s failure to close above $1300 is most likely signaling a conclusion to the current rally and the beginning of a correction.
The chart below (figure 1) has an area highlighted in yellow, identifying a compressing range which has been the predominant characteristic since the beginning of this year.
Figure 1 is a 120-minute Heiken Ashi chart, commonly referred to as a Japanese average chart. On Friday, January 4th gold traded in an expanded range as it hit a high of $1300.40 before selling off and trading to a low of $1278 per ounce. The entire week of January 7th contained a series of lower highs, and higher lows, which formed a compression triangle. The week of January 14th was no different, all week the range continued to compress as current pricing approached the apex of the triangle.
Figure 3 is a model based upon the rally ending at the resistance level at $1300 and beginning a correction. A correction here could push prices to $1269, or as low as $1246. A retracement to $1246 could be followed by a rally to $1320 per ounce. A retracement to $1269 could be followed by the rally which will take pricing above $1340 per ounce.
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Wishing you as always, good trading,