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RJ O’Brien Technician: Areas Around $1,280, $1,324 Key Chart Levels For Comex Gold

By Allen Sykora of Kitco News
Thursday August 27, 2014 1:28 PM

(Kitco News) - Gold remains near the middle of its range from the past year, making it a tricky call for technically oriented traders looking to establish positions, says Dave Toth, director of technical-chart research at RJ O’Brien & Associates.

Nevertheless, he sees potential for short-term scalpers – who quickly get in and out of the market – to be bullish as long as prices on the Comex division of the New York Mercantile Exchange are above the area around $1,280 an ounce. But for the longer term, he sees gold as still in a corrective bear market as long as gold remains below the Aug. 8 high of $1,324.30 an ounce.

The market has tended to “whipsaw” and be volatile over the last 1 ½ weeks, and in fact over the past five months, Toth noted.

“It’s the nature of the beast and it’s not a surprise,” he said. “Attention to one’s personal risk profile is key under such circumstances. Short-term traders have to have tighter short-term stops. Longer-term traders have to have wider stops….”

Stops are pre-placed buy and sell orders. They are often used by futures traders when they are already in a position to either exit a losing trade or capture a profit on a winner.

“From a very long-term perspective and on the heels of the 2012-2013 collapse, I still think the past year’s range is bear-market corrective,” Toth said. As a result, he sees potential for prices to eventually fall back below $1,179 an ounce.

Nevertheless, from a shorter-term term perspective, Thursday’s recovery above Tuesday’s $1,291.90 high technically breaks the mid-August decline, Toth said. The most-active December contract has been as high as $1,297.60 so far Thursday.

“For short-term scalpers, I think the trend is up,” he said. “I think it’s OK to be cautiously bullish, with a stop at $1,280.80.”

This is just below Wednesday’s corrective low of $1,280.90 an ounce.

“The longer-term trend is down as long as the Aug. 8 high of $1,324.30 remains intact as a resistance cap,” Toth said. “So if you’re a longer-term player, I think you want to I think you want to approach this recovery attempt as a corrective selling opportunity, but you’re assuming a risks to $1,324.30.”

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Toth added that a couple of contrarian sentiment indicators reinforce his view that gold remains vulnerable to more declines in the longer term.

“The (Market Vane) bullish consensus is still relatively high at 51%,” he said. “The high over the past year has been 55% and 53%, and each of those conditions (led to) a sharper intra-range decline. Also, our (RJ O’Brien) MRT bullish sentiment index is still relatively frothy at 85% and that too is near the upper boundary of the past year’s range, and in each of those cases, the market has sold off.”

By Allen Sykora of Kitco News; asykora@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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