Short term gold appears to be overdone by the bearish wedge pattern. Technically it’s been acting like a dream with the way the RSI continues to set higher highs and lower lows but I just can’t see initiating new positions at these levels. Gold was up almost 2.5% on Friday but most gold miners either fell or were well off their highs. I think gold’s big move will entice many traders to want to buy here, but I think those that do will find themselves underwater quickly.

One way this could play out is the potential reverse head/shoulder pattern that may be forming. For this to work out the gold markets need to correct to around the $830-870 area, consolidate, and then grind higher. I did my best to use green lines to outline the potential pattern, but your going to have to use your imagination for the final burst higher as I wasn’t permitted to draw off the chart. I will begin to question this pattern if we fall so much to push the RSI below it’s current uptrend.

For these reasons I think it’s best to hold off initiating new positions at this time.

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