Charlie Burton on Gold

I haven’t written for Simon in quite some time due to my own failings for contributing material regularly! Anyway, it’s great to be back and my aim each week will be to look across the markets and identify something that has interest to me, and thus hopefully it carries some interest to some of you…

This week, I’m looking at Gold and some interesting developments that may transpire over the coming weeks. If we look at the weekly chart, there’s a few technical aspects that are interesting to me. Firstly, every time it makes a new low, it’s only been marginally breaking the previous low before performing a retracement rally. In my view, a market that follows this pattern is a market that may be running out of steam, in this case to the downside.

Also, at the last low two weeks ago, gold turned up and gave a ‘key reversal’ week. This is where price makes a new low below the previous bar and then closes above the high of the previous bar. Key reversals can be a good indicators of an impending change against the trend looming. They don’t necessarily mean a complete change in trend but are certainly worthy of our attention.

Another observation I’ve made on this chart is the 50 moving average which is the black line. Price keeps moving back up to test it before being rejected but when its rejected, it never moves that far away before bouncing once more. So in light of what I’m seeing on the weekly timeframe, if gold can break above the high of the key reversal week, it could develop into another counter trend rally which could see it move ultimately back towards that 50 moving average.

The caveat is if it doesn’t break that high and starts to move lower, the pattern will be void if the low of the key reversal is broken. For now though, I like the overall pattern and am watching to see if it develops into a tradable opportunity on the long side…..

Charlie Burton is a co-founder of the Ezeetrader community offering education, newsletters and updates for reakl traders.  Join Charlie and his partner Kym Watson for 2 free days access to their live trading room.  Please contact sam@ezeetrader.com and quote ‘Round-the-Clock-Trader‘.