After the recent uptrend, the gold market has met stiff resistance above $1,000 an ounce and has traded its way into a head-and-shoulders reversal pattern. With the top of the head around $1,010 and the neckline near $890, a head-and-shoulders reversal projects a move down to $770 in the COMEX June gold futures contract.
Price action on Wednesday, April 8, 2009, illustrates the market’s tendency to retest the breakdown level at $890 before continuing lower. The 9-day exponential moving average just above $900 will also bring further selling resistance on short-term rallies. Daily stochastic readings indicate that short-term moves may push higher, while the trending Moving Average Convergence/Divergence (MACD) indicator is pointing toward a continuation of the downtrend.
This technical information, combined with diminishing inflationary concerns, should keep gold under pressure in the near term.I recommend traders can look to sell rallies above $890, risking to $902.My initial objective is $835.
Below is the daily chart for the June 2009 gold futures.
Mike Marshall is a Market Strategist with Lind Plus, Lind-Waldock’s broker-assisted division. He can be reached at 800-437-4189 or via email at mmarshall@lind-waldock.com.
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