Medium term
Trade view / 15 April 2016 at 9:57 GMT

Gold has made a head-and-shoulders top

Managing Partner / Spotlight Group
United Kingdom
Instrument: GCM6
Price target:
Market price:
Background

Take a look at the three-year chart for gold; it has a compelling corrective channel with a few minor breeches of the lower channel line.
Gold
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Source: www.investing.com , Spotlight Ideas

One will, however, notice that in the course of this year the upper limit of the corrective channel has been broken as trade has ranged between $1,205/oz and $1,280/oz.

Does this mark a new breakout for gold, or will the price of the yellow metal retreat and begin rotating back inside the corrective?

I think that what we are witnessing is a potential head-and-shoulders top, as bounded by the orange circle in the chart above. The first or left side shoulder formed when prices shot higher on February 11 by 4.45%. Interestingly that was also the date when the S&P 500 bottomed at 1,828.09.

The head was established on March 4 and 11 and in time-honoured technical history, the second or right side shoulder was established earlier during this week.

Of course, technical devotees will be quick to point out the fact that there has, as of now, been no breakdown through the neckline. That will not be seen until we break below USD1213/Troy Ounce on today’s evaluation. However, as this drags on we would be adding roughly USD3 per week to the neckline until the technical prospect of a head and shoulders is negated at $1,260/oz.

If the neckline is broken, then the clear technical objective is $1,135.93/oz. That price equates to a 61.8% retracement of the rally from the early December low near $1,046.5 /oz.  

If the formation of the right hand shoulder is continued, then the spot will break below the 50-day moving average for the first time since December 30, 2015.

I will open a short on gold at the level of $1,231.90/oz to give the head and shoulders theory a work out, after all, I have noticed that the level of the S&P 500 futures, while still lower at minus 2.50, is up from the minus 4.00 observed when I began typing this note.

Gold (five-year):
Gold Source: Spotlight Ideas

Parameters:

Entry: sell at $1,231.90/oz 10:31 BST.

Targets: $1,190.61… 1,163.00… 1,135.39… 1,101.22/oz.

Stop: $1,290/oz.

Time horizon:  medium term.

— Edited by Michael McKenna

For more on commodities click here.

Non-independent investment research disclaimer applies. Read more
3y
Jim Earls Jim Earls
However, it could be a cup and handle formation
3y
ABK ABK
Hello Stephen, How do you see this in terms of XAUXAG ? for the same time period..
3y
BullionGuide BullionGuide
I could not disagree with the author of this article more, Jim Earls is correct it is a cup and handle and with the recent announcement that the MiddleEast isn't going to be shutting off the Oil Spicket anytime soon, I expect a sell-off in the markets this week (04/18 - 4-22), which is bullish for gold.

I give my own analysis on my site about last weeks charts and what is in the future, however, I don't think I am allowed to post my link. But, all you have to do is search 'bullionguide' on twitter and the link will be there.
3y
Stephen Pope Stephen Pope
Dear ABK,

I am just writing a Trade Note on GSR...I will drop you a line when I have submitted it to Trading Floor...it should appear shortly thereafter.

Steve
3y
Stephen Pope Stephen Pope
Dear ABK,

I have now submitted a trade post on XAUXAG or Gold Silver Ratio.
3y
Sultan73 Sultan73
Hi Stephen ruta still short..?
Any changes..?
3y
Sultan73 Sultan73
Out mate....!
3y
Sultan73 Sultan73
3:57 💂London.
3y
Stephen Pope Stephen Pope
I have been stopped out. That is a painful experience.

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