Still Waiting For A Triangle Breakout In Gold Prices (GLD, IAU, PHYS, SGOL, DZZ)

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July 13, 2012 12:20pm NYSE:DZZ NYSE:GLD

Corey Rosenbloom: The current consolidation pattern in gold continues, yet the boundaries are narrowing ahead of an expected breakout from the structure.


Let’s start with the larger Weekly Chart picture and then highlight the key levels to watch going forward:

A simple price chart reveals the primary uptrend that was interrupted with a year-long retracement during 2008 with a “Bull Flag” pattern.

The early 2009 breakout set the stage for a resumption of the ongoing uptrend, and price traveled from $800 per ounce all the way to $1,900 before stalling into a second year-long (so far) retracement/consolidation pattern that has taken the form of a Descending Triangle.

Triangles are best seen as consolidation or correction patterns, where a potential trade set-up develops on a firm breakthrough of either of the triangle trendline boundaries.

Let’s zoom-in to the Daily Chart to highlight the current compressing levels at work:

The current Descending Triangle Consolidation Pattern began at the August/September 2011 top and could be coming to an end with a future price breakthrough.

The clear lower support level resides from $1,525 to $1,550 and is a hard line where buyers have stepped in strongly in the past – they appear to be doing so currently though we need to monitor the situation carefully.

The falling upper trendline has been effective in containing price at declining resistance; now, the key level now resides just above the easy-to-remember $1,600 reference which is also near the falling 50d EMA.

We try not to be biased, and instead focus our trading plans based on IF/THEN probability and reaction statements, such as:

A firm breakthrough above $1,600 that continues (especially with visual higher volume and momentum) could lead to a full breakout and trend resumption that could lead to a future move back to $1,800 at least.

However, an alternate breakdown under support that carries price under $1,500 – again on higher volume – could lead to a larger reversal and breakdown sell impulse under a shattered support floor.

Short-term and Swing Traders can develop strategies (breakouts/retracements that develop) depending on which of these trendlines fail.

Continue monitoring these compressing levels and real-time developments as buyers/sellers fight for control at these visual levels.

For detailed analysis beyond key levels (and additional timeframe commentary), join the fellow members of our Weekly Intermarket Report series.

Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Gold Trust (NYSEARCA:IAU), Sprott Physical Gold Trust (NYSEARCA:PHYS), ETFS Gold Trust (NYSEARCA:SGOL), PowerShares DB Gold Double Short ETN (NYSEARCA:DZZ).

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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