The Art of the Gold Chart
Here is this week’s post for SFO Magazine:
SFO Daily: Playing the Gold Market—Eyeing Inverse Head and Shoulders
Friday, April 13, 2012
By J.C. Parets
Is gold tracing out an inverse head and shoulders continuation pattern?
That’s really the big question for me in the yellow metal.
We know gold has been in a massive uptrend for over ten years. This isn’t a secret. Every pullback or consolidation over the past decade has been an opportunity to get on board. Is this current choppy action just another one of those? Or is it a more significant top?
At first glance, I don’t see anything toppy about the action. Nothing in the chart or price action is telling me that a major topping formation is under construction yet. What it does look like to me is just corrective, healthy action —at least for now.
THE CHART
Taking a look at the chart of $GLD (SPDR Gold Shares Trust), it appears that the right shoulder of this potential inverse head and shoulders pattern has been forming since running into neckline resistance at the end of February. The neckline is more subjective here and one can make the argument that it stands somewhere between 174-175. The left shoulder of this pattern was built throughout all of October and then the Head down around 150 in December.
THERE'S SYMMETRY
The symmetry of this formation certainly increases the possibility of this in fact being the consolidation/continuation pattern described above. In other words, the left shoulder and potential right shoulder bottomed out around the same price. And the time that each low took to form is about the same as well.
Tags: $GC_F $GLD