Saturday, June 9, 2012

KI$$ swings can consider gold at these levels: technical charts

Gold hasn't fared well for months. But it's in a position where even KI$$ swings can make a good entry, with a defined stop- loss under the recent set of lows on these charts (perhaps about $1500-$1510). In fact, it would even be possible to use $1550 as a nearby level to want support, which is above the real support area (approximately $1515), based on the rising trend line on the point-&-figure chart at right here. This P&F chart shows a potential target of $1850, so long as it punches above $1600 (a stop order could be used to trigger the buy).

The "high pole" the P&F refers to is the strong spike up on Friday. Sure it could mean something to sell, but it could also be the start of the move up. Follow-through will of course be required.

Of course gold investors want the price to soar much higher, such as to the $2200's and beyond. Based on the lengths of the uptrend waves prior to this consolidation, $2300 or more doesn't seem unreasonable. But first gold must break above the channel midlines indicated on the weekly chart, below. Assuming it does indeed get to $1850, some of the position could be taken off (TMAR - "take the money and run") and place a reasonable stop loss under the remainder, at a level that one feels comfortable with.

The weekly chart does show some Fibonacci retracement levels I had marked weeks ago. So far, gold has remained above the $1517 level, and so it may not need to seek the $1392 level. It is possible that gold has been correcting in time rather than price. That's why it came out of the uptrend channel I'd marked, but it's moving sideways in the price channel that's gone horizontal on the weekly chart. Interestingly, this does alternate with the sharp correction that it experienced after it broke above the price highs spike of the 1970's. That sharp correction looked like a handle in a so-called "cup and handle" set-up. Now, the sideways consolidation that has occurred so far could potentially be building a base from which higher highs are possible. We just don't want to see it break decisively below this range. I will say, however, that a quick poke below $1517 could theoretically be acceptable in order to complete the consolidation; but I recognize that most investors would not want to take that risk. So set your trading plan accordingly, as you see fit.

(For example, one approach might be to either await a drop below and rise back above $1517, or alternatively a rise above $1600. There may well be other approaches.). Below are the weekly and daily charts.

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