Checkup on Gold Structure and Price Breakout: SPDR Gold Trust, iShares Gold Trust, ProShares Ultra Gold

technical-lookCorey 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.

This article is brought to you courtesy of Corey Rosenbloom from Afraid to Trade.

Related: SPDR Gold Trust (NYSEARCA:GLD), iShares Gold Trust (NYSEARCA:IAU), ProShares Ultra Gold (NYSEARCA:UGL).

Leave a Reply

Your email address will not be published. Required fields are marked *