Technical Trading: Divergences, Fibonacci, and Structure In Gold (GLD, GDX, GDXJ, IAU, DZZ, DGP)

Corey Rosenbloom: Gold (NYSEARCA: GLD) fell sharply from the $1,800 resistance level, so let’s take a look at what led up to the fall and what the current structural levels to watch are for gold, including a Fibonacci Cluster near $1,730.

First, the Hourly Structure:

First, Gold’s Hourly (intraday) structure is in a confirmed UP-Trend as evidenced by the sequence of higher swing highs and lows – that’s the first place you start when analyzing price structure.

Second – of immediate interest – Gold has a tiny ‘polarity price’ near $1,750 which is where we are at the moment. It will be very important to see if gold can maintain the upward structure and thus rally higher off $1,750.  If not, we’ll see lower potential support targets on the 15-min chart.

Third, price reversed/retraced into the “Fair Value Area” at $1,800 which was the Consolidation Point (apex) of the prior triangle trendline pattern in September.  This is a good example of how price can turn-around at prior “Fair Value” (consolidation) areas.

And finally, I’m showing the 3/10 Momentum Oscillator with recent positive and negative divergences highlighted, and you can see the subsequent price reaction AFTER these divergences.

Main idea – the negative divergence into the $1,800 “Fair Value” area was enough to turn price lower, heading towards lower support targets at the moment.

Speaking of lower support targets, let’s drop to the 15-min chart to see the short-term Fibonacci areas to watch:

I like including lower timeframes so you can see the structure – namely divergences – clearer.

Take a moment to study the three big (multi-swing) negative momentum divergences that preceded short-term retracements (these are good spots to take profits off the table if you’re a short-term trader).

I drew two recent Fibonacci Grids, starting with the mid-October low and early November low.

These grids overlap at $1,727 or roughly the $1,730 level for easy reference.   Otherwise, the closest short-term level is $1,742.

Though not shown on the intraday charts, the rising 20 day EMA rests at $1,730 as well so we’ll keep our attention focused on the $1,730 confluence to see if price holds and bounces off this level (confirming the bullish intraday structure) or else breaks through it on its way to $1,700 (which would be an unexpected set-back for the buyers/bulls).

Take a few moments to study these good examples of divergences and price retracements/resolutions on the intraday frame.

Related ETFs: SPDR Gold ETF (NYSEARCA: GLD), Market Vectors Gold Miners ETF (NYSEARCA: GDX), Market Vectors Junior Gold Miners ETF (NYSEARCA: GDXJ),  iShares COMEX Gold Trust (NYSEARCA: IAU), PowerShares DB Gold Double Short ETN (NYSEARCA: DZZ), PowerShares DB Gold Double Long ETN (NYSEARCA: DGP).

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.

Leave a Reply

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