Gold Prices Are Holding Support; Threatening A Major Breakout (GLD, IAU, SGOL, PHYS, GDX)

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February 23, 2012 5:49pm NYSE:GDX NYSE:GLD

Corey Rosenbloom:  Let’s take a moment to view the Daily Chart of Gold, paying close attention to this week’s successful test/rally off confluence support which now ‘threatens’ a breakout above the initial resistance target.

Here’s the Daily Structure of Gold:

Officially, Gold is in a short-term SIDEWAYS trend with range boundaries between $1,600 (or even $1,550) as support and $1,800 as upper resistance.

Of course, the longer term primary and intermediate trends remain bullish/uptrending in the higher timeframe picture.

The key point to focus on currently is the recent support line (with multiple bullish reversal candles) at the rising 20 day EMA in February.

One could say price formed and broke above a Bull Flag trendline, and price is currently in motion towards the minimum overhead price target at $1,800 – the prior high from November 2011.

From a planning standpoint, if gold continues its upward movement and breaks firmly above the $1,800 boundary, then the next potential target opens up to $1,900 – the all-time high from August/September 2011.

Ironically, these are also “Round Number” levels in addition to prior points of price reversal – making them important references.

That’s the current picture, but let’s take a look underneath price to see an additional support level from Fibonacci:

This is a chart I published for members in last weekend’s “Intermarket Report” when discussing the potential buy opportunity this week – which so far has developed successfully.

The main idea of this chart is to show two levels of Fibonacci Retracement Confluence as drawn at the $1,710 area (highlighted).

You can also see the three ’spike’ intraday reversals off this support confluence – corresponding as well with daily reversal candles.

Going beyond the Fibonacci Confluence at $1,710, I’m showing a positive momentum divergence throughout the month of February in context of this support line.

From an objective standpoint, had gold moved this week under $1,700, it would have triggered a potential breakdown trade.

From the report to present, gold has already achieved its short-term upside target of a move back to the $1,760 level and is on to the higher target – as seen on the Daily chart – at $1,800.

It should be very interesting to see whether gold continues its upward move and shatters the $1,800 prior resistance target, or takes a breather/pause (retracement) from its initial upside target.

Related ETFs: iShares Gold Trust (NYSEArca:IAU), ETFS Physical Swiss Gold Shares (NYSEArca:SGOL), SPDR Gold Trust (NYSEArca:GLD), Market Vectors Gold Miners ETF (NYSEArca:GDX),  Sprott Physical Gold Trust (NYSEArca:PHYS).

Written By Corey Rosenbloom, CMT From Afraid To Trade

My name is Corey Rosenbloom, CMT (Chartered Market Technician) trader, educator, analyst, and I am excited to share with you my experiences studying and trading the markets and to hear from you regarding your experiences, challenges, and frustrations, and successes. My goal is to create a community dedicated to reaching out to those who have been burned by the market or are anxious about risking their money to make money in the stock, options, or futures markets. Together, we can share strategies and learn how to overcome crippling fears that keep us from achieving our highest potential.

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