December Gold broke out to the upside of a triangle chart pattern on the daily chart, confirming the formation and setting up the market for a potential rally into a major retracement zone.
On Wednesday, December Gold took out downtrending Gann angle resistance at $1596.90, fueling the start of a huge rally. In addition to the angle, the market also took out a swing top at $1603.30, turning the main trend to up on the daily chart and creating a new higher swing bottom at $1566.80.
Daily December Gold Pattern, Price & Time Analysis
Momentum and rising volume are the keys to success with this chart pattern. Traders must recognize the move and begin to act on the shift in direction. Based on the 102 market day trading range of $1800.90 to $1535.40, the breakout may have ignited the start of a rally into the 50 to 61.8 percent retracement zone at $1668.15 to $1699.48.
Standing in the way of an outright breakout are previous tops at $1630.10, $1639.60 and $1646.40. Bearish traders may try to defend these positions, but I have no doubt that buy stops are hidden slightly above each of these tops. If there is strong buying behind the move then these stops should be triggered, creating more upside momentum.
According to the theory of technical chart patterns, the triangle chart pattern is categorized as a non-trending pattern. The highlight of the pattern is the gradual compression of the prices by the support and resistance lines. This chart pattern typically indicates impending volatility similar to the move taking place at this time. The key to success, however, remains the follow-through guided by rising volume. Momentum traders need to recognize this breakout and chase the market higher or the move will die and December Gold will fall back into the triangle.
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