Corey Rosenbloom: After a sharp rally up off the$1,550 initial target support level, gold broke today above the key $1,600 ’round number’ reference level.
Let’s update the intraday structure charts of gold and make a note of the $1,600 breakout and what area draws our attention currently.
First, the Hourly “Price Structure” Chart of Gold:
Gold is in a short-term downtrend as evidenced by a lengthy progression of lower swing lows and lower swing highs, all of which have been contained within the boundaries of a falling parallel trendline channel.
There was one other ‘pierce’ outside the trendline boundaries which occurred on November 23, 2012 but we can see that the “false’ breakout resulted in a sudden movement back to the lower target (the lower falling trendline).
We’ll be watching to see if the most recent ‘pierce’ under $1,580 could have a similar outcome to the upside.
For now, we’re watching gold relative to the firm breakout above $1,600 (this morning’s pivot level) and the current interaction with the falling “Midpoint” Trendline into $1,620.
If structure were to continue, it would suggest that the next ’swing’ in gold would be to the upside toward $1,650 or $1,660 but again traders may need to see a trigger-break above $1,620 if they missed playing long from this morning’s breakthrough impulse above $1,600.
Let’s keep the hourly chart structure – falling parallel trendline pattern – in mind as we view the 30-min chart:
The 30-min chart above contains ‘continuous’ or overnight data while the hourly chart only reveals NYSE trading hours (9:30 to 4:00 EST).
Again we see the interaction at the $1,600 pivot which provided temporary support mid-February, only to generate a sell-short impulse on the breakdown on February 20.
After a sharp turn-around reversal (with divergences) into the $1,550 prior support target, we see a movement back to the $1,600 pivot – a target for ‘fade’ or counter-trend traders.
Gold broke firmly and impulsively above $1,600 this morning, resulting in a sharp rally suddenly to the $1,620 midpoint and prior swing high target.
From here, we’ll continue watching the $1,620 pivot with respect to the “open air” and potential continuation to the upside toward the $1,650 or $1,660 minimum upside target (which is near the prior swing high and falling hourly trendline).
Continue studying gold with your own charts and indicators but don’t forget that a clean picture of market structure (price and trendlines) can help break ‘indicator or analysis paralysis’ should it occur.
Related: SPDR Gold Trust (NYSEARCA:GLD), iShares Gold Trust (NYSEARCA:IAU), ProShares Ultra Gold (NYSEARCA:UGL).