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Technical Trading: Gold Bulls Hang Tough, Despite Dollar
By Kira Brecht of Kitco NewsMonday December 8, 2014 9:50 AM
(Kitco News) - February Comex gold futures are moderately firmer in early New York trading action, despite overnight strength in the U.S. dollar. For now, gold bulls are hanging tough and limited chart damage was seen after Friday's surprisingly strong U.S. non-farm payrolls report
On the weekly chart for February Comex gold futures (not shown here), the market formed a "bullish outside" week and closed higher. That simply means that last week's range exceeded the previous week's high and low and gold closed higher on the week. It is a positive signal on the weekly chart.
On the daily chart, for now, the 20-day moving average at $1,189.40 is holding as strong nearby support for the gold contract. The market fell to touch that level on Friday, but is now rebounding above that area. See Figure 1.
Drilling down to the 60-minute chart, Friday's low at $1,186.40 is important near term support. That floor needs to hold to keep the very short-term outlook sideways, with the possibility for improvement. See Figure 2 below.
Shifting back to the daily chart, the market has staked out two strong support areas in recent weeks at the November 7 $1,132 low and the December 1 $1,141.70 low. Those can be seen on Figure 1, marked "A" and "B." Both of those sessions saw "wide-bar" days emerge with bullish outside days forming at the final bell.
Buyers are defending gold on dips, and those two lows represent perhaps the bottom of a new short-term range that may be developing on the daily chart.
Daily momentum studies are lackluster. The 14-day relative strength index is mid-range and not showing strong momentum currently. Heading into the holidays and year-end, quiet trading conditions could begin to grip the market.
In the very short-term, as long as the 20-day moving average and Friday's low at $1,186.40 hold firm, sideways to higher trade can be expected. Strong resistance lies at $1,221, marked at point "C." It would take gains through that ceiling to open the door to a fresh buying wave.
By Kira Brecht, Kitco.com
Follow her on Twitter @KiraBrecht
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