How To Trade Gold's Triangle Now
Monday August 15, 2016 10:28
(Kitco News) - Aug. 15 – It's August. The financial system didn't collapse post-Brexit. Wall Street traders are vacationing in the Hamptons. And, the gold trade is a snore right now.
Traders who like to study their charts and identify patterns may have noticed a developing "Triangle" on the daily gold futures chart. Here's what that means.
Technical analysis 101: Triangles are generally "continuation" patterns. That simply means that when a trend pauses, one of the chart formations that can develop is the so-called triangle pattern. Once the market is done coiling –the previous trend (in this case – rising prices) generally continues.
There are 3 types of triangles:
What is gold forming now? A classic symmetrical triangle is unfolding. See Figure 1 below. This occurs as a market begins to coil or trade sideways within narrower and narrower ranges. There are four points to the triangle, labeled 1, 2, 3 4. The upper trendline stands as resistance and the first breakout point.
Good to know. There are several important technical points for traders to remember about triangle formations.
Patience is needed. As with most things in life –patience is needed as the triangle develops. As of Monday morning it has not been confirmed yet. But, the set-up is there. Short-term traders sometimes attempt to play the swings within the triangle (buy near the lower end, sell near the upper end) –but you must be nimble and disciplined for this approach.
In the meantime: Plan your trades and when the opportunity arises, trade your plan.
Looking for more charting fun and insights? Check out this story >>> Gold Traders: Why You Need To Watch Treasury Yields Now