Weekly Gold Chart Has Formed a Shooting Star… or Something
February 2nd, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
There was a change of circumstances between the time I wrote this post and the close of trading on Friday. Remember how grim things were looking for the dollar, and how well gold was doing?
Don’t ask me how, why, who? I don’t know, but the dollar rallied into the weekend.
Of course, what do I do after I say that I’m not going to look at the gold charts anymore? That’s right, I brought up a weekly chart to see if I could find anything interesting; to see if that hard dollar rally “painted” anything weird on the gold chart. It’s Friday, so that session closes out the week and prints a weekly candle that all traders will look at.
What I found was… Quite weird.
Many technicians are going to look at that weekly chart and gasp, “Oh my! Gold just put in a Shooting Star on the weekly chart!” The Shooting Star is a key reversal pattern, possibly indicating a top. Yep. By golly, there it is, complete with accompanying high band stochastics and RSI.
Weekly gold
Indeed, “Shooting Star” is what I would think if I didn’t smell a rat from that dollar rally. But look at the intraday action from last week as four hour candles. Notice how the body of the negative candle FOR THE ENTIRE WEEK is created in a single four hour period! On Friday.
Intraday gold, 4 hour interval
Man, if I didn’t already have a Coincidence category on Cryptogon, I’d be adding it for this post!
Are there organizations out there that can paint a Shooting Star on a weekly gold chart? I would like to think not. (Of course, if you’re a regular Cryptogon reader you probably just snorted and spit some of your cocktail onto the screen.) But look at that 4 hour interval chart and explain to me what happened on that candle, before the weekend. I looked at it on a five minute chart and the majority of the move happened in 25 minutes. That really, really makes me wonder if someone is desperate to stop this rally. And I mean DESPERATE. They didn’t go about it in a smart way. They didn’t fade highs and slowly and subtly knock it down over time. They didn’t do it in a way that would get the sheep to make the move dynamic. But look how perfect that Shooting Star is…
I’m not selling my gold anytime soon. I don’t care if They paint Satan with two horns and a pitchfork on that chart.
More: Straight Technical Analysis
I’m going to swap my tin foil trader hat for my straight technical analysis hat.
Looking at the daily and weekly stochastics, gold looks ready to retest supports UNDER $900.
The MACDs in several intervals have formed a downward trending, multilane highway. (It is important to note that the weekly MACD is still headed up.) With the daily and weekly stochastics crossed down from extremes, it looks like more short term downside is likely.
Gold MACDs in several intervals
Buying opportunities? I’m not necessarily saying to wait for daily and weekly stochastics to go under 20 (you could be waiting A LONG time on the weekly), but wait for them to unwind a bit. Look to believe a daily stochastic cross up under that 50 fib fan line but above the 61.8 fib fan line, from $875 to $890.
Longs will want to see $875 kept intact, which also happens to be near the 61.8 fib fan line.
Below $875, I’d hold off, hoping it get it closer to $850, which is THE support of supports.
Gold, daily interval
If it does bounce off $900, should you believe it?
It’s a tough call, but with daily and weekly stochastics crossed down, I’d have to say no. I probably would not add more until stochastics unwound some more. I’d believe a bounce off $900 once it crosses $936. HA
On a longer term, weekly chart, the move is fully intact, with MACD headed higher. It seems silly to even split hairs about the day to day noise when you look at that weekly chart over years…
For now, expect some shorter term pullbacks with weekly stochastics crossed down from extremes.
I cannot, however, recall looking at any issue with a more significant support than the $850 level on gold. If it can manage to get back down into that zone, $850 is a strong support. Just know that at $844, gold longs would have some hard decisions to make. Not me, though, because, as you know, I’m not selling.
Not-Based-On-Anything-Gut-Feeling: More and more people will simply be buying any pull backs and to hell with these charts.
The exchange would know who was shorting. But we won’t.