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Gold Patterns

10/16/03 10:43:06 AM
by Gary Grosschadl

The gold price challenged a previous high several weeks ago and promptly came back down. What patterns are evident?

Security:   $GOLD
Position:   Hold

Analyzing the weekly chart of Gold - Continuous Contract shows several pattern possibilities. This is what makes the volatile gold markets so challenging - the myriad of possibilities. There are several patterns contained in the overall pitchfork view.

The weekly chart shows a previous symmetrical triangle breakout move. Often with pattern breakouts, be they triangles or other patterns, the initial breakout can be countered with a throwback test. This is a test of the breakout area or close to it and is most times very telling as it either confirms the validity of the breakout or points to a pattern failure and a move back down. Here a move down to the initial breakout area of $368 is shown. Sometimes this test will occur at or near the apex of the triangle.

Weekly gold chart showing several patterns.
Graphic provided by:
This same move has now come down to test the lower pitchfork line, which shows promise of holding. This would be very bullish for a resumption of the gold uptrend. As far as other patterns evident...this can also be viewed as an ascending triangle with a top trendline drawn at $375. Or it might also be a double top attempt. Either way the pitchfork may be a good guide going forward. As long as the pitchfork's lower median line holds, the bullish intent stands for this volatile commodity until proven otherwise.

Several indicators displayed below the chart hint at bullish promise. The RSI (relative strength index) is a momentum oscillator that compares the magnitude of gains against the magnitude of losses. Holding the 50 level is often indicative of a bounce and shows underlying strength. Both stochastic series (one set for a shorter-term view) show a position at what are often turning points, the 50 or 20 level.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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