By FXEmpire.com
After forming a hammer the session before, the gold markets fell hard during the Wednesday session in order to retest the bottom of the Tuesday hammer for support. The area coincides with the $1,640 level – a level we keep seeing over and over. It has become apparent to us that this level is the site of a real battle.
The level has seen itself prove to be supportive several times lately, save the exception of one minor breakdown, but the price managed to pop back above it again and again. The reaction to this area suggests to us that it will turn into a major support area given a chance, and the fact that the overall trend is still indeed to the upside, we are even more interested in playing the market off of it.
Because of this, we are looking to buy the gold market on signs of support at the immediate area we find ourselves in. The shorter term charts can be used as a guide, with a special attention paid to certain candlestick formations such as hammers at this level. The first sign of that particular candlestick on an hour of four hour chart would have us long. Obviously, a daily hammer would be even more interesting, but the fact that the area has held up so well and the trend has been up for over a decade now has us willing to take a chance on it.
The upside will more than likely see a couple of major resistance areas that could work against the bulls from time to time. For example, the $1,700 level looks very resistive at this point, and will more than likely cause the market to pullback. However, we still believe in the gold markets over time and suspect that the area will eventually give way.
With central banks doing so much to ease and print money, and the threat of inflation as a result, gold should continue to do well over time. It is through this prism of thought that we simply cannot sell the market.
Gold Forecast April 19, 2012, Technical Analysis
Originally posted here
