GOLD: BIG PICTURE & LONG TERM ANALYSIS
Let's look at the weekly chart for GOLD. For that it's important to analyse all technical aspects and keep an open mind.
Long term investors will see 2 major patterns here:
1. a major kind of rising wedge (red lines): price is evolving between the 2 red lines since 2008, forming a rising wedge when you connect the highs and lows. What does it mean from a technical point of view?
Although the price is in an up-trend, a rising wedge is generally a bearish signal as it indicates a possible reversal during this up-trend. Rising wedges indicate the likelihood of falling prices after a breakout through the lower trend line.
As every technical pattern, it does not mean it will materialise, but at least it gives you clear levels of supports and resistances. Even if this bearish pattern materialises, the wedge can extend until 2030, so Gold can rise way more before falling.
2. a massive cup and handle: A cup and handle price pattern is a technical indicator that resembles a cup with a handle.
As you can see on the chart, the cup formed from 2011 to 2020, while the handle has been forming since 2020 until now.
A cup and handle is considered a bullish signal extending an uptrend.
After the high forms on the right side of the cup, there is a pullback that forms the handle. Sometimes this handle resembles a flag or pennant that slopes downward. This is exactly what we are seeing now (blue dotted lines). The blue dotted lines are giving you short term supports and resistances levels. Use these to trade GOLD on a shorter time frame.
The handle represents the final pullback before the big breakout and can retrace up to 1/3 of the cup's advance. Sometimes it can retrace up to 1/2 but not more. I have added the Fibonacci retracements on the chart, Gold has retraced 0.382, which is ideal for a bounce.
The target of a cup and handle is the height of the cup added to the breakout point (the neckline) of the handle. The neckline is the upper red line of the rising wedge. If we project the height of the cup we get a target zone between $3400 and $3500.
We could see Gold consolidating a bit more within the blue dotted line channel. As long as we do not fall below the max retracement zone and lower red line, the formation is bullish long term. A break upwards of the blue dotted line channel would trigger a long trade to the red line. A break of the upper red line would confirm the cup and handle pattern.A break of the lower red line won't be good at all for bulls.
Note that the above analysis is purely based on technicals and do not take into consideration fundamentals.
Long term investors will see 2 major patterns here:
1. a major kind of rising wedge (red lines): price is evolving between the 2 red lines since 2008, forming a rising wedge when you connect the highs and lows. What does it mean from a technical point of view?
Although the price is in an up-trend, a rising wedge is generally a bearish signal as it indicates a possible reversal during this up-trend. Rising wedges indicate the likelihood of falling prices after a breakout through the lower trend line.
As every technical pattern, it does not mean it will materialise, but at least it gives you clear levels of supports and resistances. Even if this bearish pattern materialises, the wedge can extend until 2030, so Gold can rise way more before falling.
2. a massive cup and handle: A cup and handle price pattern is a technical indicator that resembles a cup with a handle.
As you can see on the chart, the cup formed from 2011 to 2020, while the handle has been forming since 2020 until now.
A cup and handle is considered a bullish signal extending an uptrend.
After the high forms on the right side of the cup, there is a pullback that forms the handle. Sometimes this handle resembles a flag or pennant that slopes downward. This is exactly what we are seeing now (blue dotted lines). The blue dotted lines are giving you short term supports and resistances levels. Use these to trade GOLD on a shorter time frame.
The handle represents the final pullback before the big breakout and can retrace up to 1/3 of the cup's advance. Sometimes it can retrace up to 1/2 but not more. I have added the Fibonacci retracements on the chart, Gold has retraced 0.382, which is ideal for a bounce.
The target of a cup and handle is the height of the cup added to the breakout point (the neckline) of the handle. The neckline is the upper red line of the rising wedge. If we project the height of the cup we get a target zone between $3400 and $3500.
We could see Gold consolidating a bit more within the blue dotted line channel. As long as we do not fall below the max retracement zone and lower red line, the formation is bullish long term. A break upwards of the blue dotted line channel would trigger a long trade to the red line. A break of the upper red line would confirm the cup and handle pattern.A break of the lower red line won't be good at all for bulls.
Note that the above analysis is purely based on technicals and do not take into consideration fundamentals.
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