Gold 1 OZ (XAU=X) chart pattern suggests investor indecision and impending volatility

Gold 1 OZ (XAU=X) chart pattern suggests investor indecision and impending volatility

Gold 1 OZ (XAU=X) chart pattern suggests investor indecision and impending volatility

Gold futures closed lower on Friday, and for a third session, traded inside the extremely wide, $57.20 range on August 13. Usually, this chart pattern suggests investor indecision and impending volatility. In this case, however, it could be a sign that momentum is getting ready to transition from upward to downward.

Helping to underpin gold prices are worries over global economic weakness and uncertainty over U.S.-China trade relations. Helping to cap gains were firm U.S. Treasury yields, increased demand for higher risk assets and a stronger U.S. Dollar.

Based on Friday’s price action and the close at $1523.60, the direction of the December Comex gold futures market on Monday is likely to be determined by trader reaction to the 50% level at $1517.50.

Bullish Scenario

A sustained move over $1517.50 will indicate the presence of buyers. Overcoming the former top at $1532.40 will indicate the buying is getting stronger. (Last week’s surge was fueled by buy stops). If the upside momentum continues to build then look for the rally to possibly extend into the closing price reversal top at $1546.10. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $1517.50 will signal the presence of sellers. The daily chart is wide open to the downside under this level so look for a potential acceleration to the downside with the next target last week’s low at $1488.90.

Taking out $1488.90 will confirm the shift in momentum to the downside. This could lead to further weakness into a series of retracement levels at $1479.10, $1471.30 and $1463.30.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 1,419.17.

The projected upper bound is: 1,558.30.

The projected lower bound is: 1,476.14.

The projected closing price is: 1,517.22.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.

An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend (which appears to be the case with PREC.M.XAU=). It then signifies that the momentum may be shifting from the bulls to the bears.

If the engulfing bearish pattern occurs during a downtrend, it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 68.6168. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 68.43. This is not a topping or bottoming area. However, the RSI just crossed below 70 from a topping formation. This is a bearish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 0 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 76. This is not a topping or bottoming area. The last signal was a sell 3 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 9 period(s) ago.

Rex Takasugi – TD Profile

PREC.M.XAU= closed down -9.205 at 1,513.750. Volume was -0% below average (neutral) and Bollinger Bands were 117% wider than normal.

Open     High      Low     Close     Volume___
1,523.6001,527.4001,503.8001,513.750 0
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1,500.02 1,420.23 1,316.70
Volatility: 16 18 13
Volume: 0 0 0

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

PREC.M.XAU= is currently 15.0% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 11 periods.

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