GOLD prices are spiking today after breaking yesterdays consolidation in the price zone of 1270-88$. Gold has broken the resistance and has reached 1320 in early trading today. The Head and Shoulders pattern has lost many possibilities of success after this big upward move that is challenging the down trend. Prices have fallen in an overlaping pattern from 1375$ and if Gold manages to break above 1330$, it will have ended the and lower highs pattern that was dominant during this downward move. Gold has made in the recent past similar big upward moves that were only corrective moves that could not break above the red downward sloping trend line that connects all the highs from 1430$. Gold today is not only making a big upward candle but also challenges the down trend resistance trend line as shown in the chart below.
The rise from 1250$ lows to today’s high near 1320$ might be an early signal that trend is changing. The decline from 1433$ is overlapping and there is no clear downward move. The rise from 1250$ currently consists of 3 waves and we need to see a 4th and a 5th wave to new higher high in order for bulls to be confident that the upward momentum will continue. Currently prices should not fall below 1270$ for this scenario to be valid. So if the decline from 1433$ is just part of a correction and prices have bottomed at 1250$, then we should assume that another move up similar to the initial rise from 1180 to 1433 should take place soon. Important levels to watch that could decide the longer term trend are 1330-1350 and 1300-1270. As I’ve been saying in twitter, most of the Gold traders were noticing the H&S pattern that was not a good sign, as prices usually do exactly the opposite of what most people expect. The next couple of days will help us clear the picture regarding to what we should expect next for Gold prices.
As always, thank you for taking the time to catch up on my thinking.