For those of you who read my August 11th blog, found here: http://blog.qualitystocks.net/?p=11665, you knew that gold was in uncertain territory. It could have been a possible bottom, or it could have been on the verge of collapsing to lower lows. The days following the article have finally answered our questions. The verdict is in: it’s a bust!!! I know some are just flat out non-believers when it comes to technical analysis, but the gold chart is a perfect example of just how powerful charting can be! This article will update the chart, and it should be noted that all NEW annotations are done in pink.
Annotated Gold Chart: http://Blog.QualityStocks.net/wp-content/uploads/2008/08/picture29.png
In my previous article, I highlighted $860 and $847 as “key” support levels (seen with the blue circles surrounded by the pink circle). As can be seen, those levels could not support the price when tested, and as a result, the price fell all the way to the next support level (highlighted by yellow arrows). This is the next key support area on the chart, so once again, we are at a “wait and see” area. One thing is for sure though, the bears are in complete control, and any bounce that may ensue will have an uphill battle. The levels of $860 and $847 are now “key” resistance levels. As long as the price does not close above these on any sort of bounce in price, the chart will remain bearish, and that’s what we want!
Now let’s talk about the fun stuff! The current levels we’re flirting with now are between $790 and $775. This is the current support cushion. If we can get a close below $775, the odds are in our favor of a fall to approximately $725. This would be yet another great move, which would propel the dollar upwards, and continue to help with the decline in oil.
At this point in time, gold is considered in “bust mode”, and is in a clear downtrend. Much now needs to happen in order to put gold back into an uptrend, but that doesn’t mean there won’t be any bounces along the way. The territory we are in now may provide the bounce, but as long as our resistance levels hold, the bears are still in charge! If you decide to go long in any sort of gold play, I would lock in profits quick, and not plan on holding too long since you would be trading against the trend, so be smart! As I said in my previous article, “LET’S GO BEARS!!!”
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