By FX Empire.com
Gold markets had a bullish week until Friday. The market has been grinding higher, and as a result the bullish momentum continued to pick up until the Non-Farm Payroll numbers came out so strongly.
The $1,750 level has held as resistance, and although we see that the $1,700 level looks supportive on the daily chart, we see the weekly chart as looking very bearish all of the sudden. Given the potential for support in the $1,700 neighborhood, we are looking to sell the weekly chart on a break of the candle form the previous 5 sessions as it is a shooting star, but are also going to pay attention to the $1,700 level to see if the market starts to get bullish on the smaller time frames.
The selling of gold is certainly countertrend, and because of that, we need to be extra careful if we do it. Of course, if we break above the top of the shooting star, it is a massively bullish sign at that point. So as you can see – we have a few different possibilities going forward.
The central banks are all talking about easing in one way or another. Because of this, there should continue to be a bid for gold. Speaking of bidding for gold – many of those central banks is also buying gold at the same time. Because of this, we like buying overall. With this in mind, we actually prefer to see the shooting star get violated to the upside as it is with the 11 year trend. The overall “feel” of the chart is of a bullish pennant or flag, and we think that it is only a matter of time before this market explodes to the upside because of this. However, we haven’t got those signals yet, and as such we can only play the signals that the markets are showing.
We like selling on a break of the shooting star, thinking of it as a pullback not a meltdown. We will have to watch the $1,700 level if we do though. We like buying a break of the top of the shooting star even more, and would happily do so hand over fist.
Gold Forecast for the Week of February 6, 2012, Technical Analysis
Originally posted here
