POINT & FIGURE

Yen-Denominated Gold Breakout

12/02/04 08:14:13 AM

by Arthur Hill

Gold priced in US dollars has been and remains in a strong bull market. However, gold priced in Japanese yen only recently has broken resistance to continue its bull run.

Security: $GOLD/$XJY
Position: Buy

Figure 1 is a classic point & figure. Each box (X or O) represents 200 yen, and a three-box reversal is required to change directions.

As this chart shows, gold/yen met resistance around 45500 in February 2003, January 2004, and May 04 (red arrows). This resistance zone represents overhead supply that prevented gold/yen from moving higher. Each breakout attempt was met with selling pressure and pushed back down.

Figure 1: Here's a classic point & figure, of gold and the Japanese yen.

Graphic provided by: MetaStock.

Graphic provided by: Reuters Data.

Despite the failures at resistance, buying pressure remained strong on each dip; note the higher lows extending back over the past year and a half (green arrows). This shows buying pressure coming in at higher and higher levels.

The overall pattern is a large ascending triangle. These are typically bullish continuation patterns and the September break above the resistance zone confirms the pattern. This is a clear victory by demand over supply and argues for higher prices over the coming months.

Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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POINT & FIGURE

Yen-Denominated Gold Breakout

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