February Gold futures hit a new all time high for gold at $1200.50 this morning. With $1200 being a rally target thrown around a lot, it seems like a good time to take a look at the chart.
November 24th was the first daily bar circled; the inside day, doji and range contraction was a breakout setup; gold had a breakout rally to a new contract high to 1194.40 on 11-25.
Breakout days are circled
Friday the 27th was an illustrative session for many reasons. Coming into the session I was anticipating a Taylor Technique sell short day. Gold had just showed two higher closes (the buy and sell days) and ROC rose to a level for a sell short day signal. Additionally there is a tendency for a rally on a breakout day to yield a sell short day in the following session as the rally is taken back.
Looking at the 27th, the open was a gap higher – a potential “Oops” sale. As the 25th high at 11494.40 was taken out, the selloff turned into a rout; the break under the 11/23 swing high at 1175.50 added fuel to the selloff. By the close of the session, the bulls had returned. The close above the midpoint of the day’s session (1166.30) was bullish.
Yesterday was another breakout setup (range contraction, inside day and doji). There was a successful test of the midpoint of the selloff before a recovery to an unchanged close.
The breakout setup gave us a rally today; an intraday high at 1193.00 and yesterday’s high of 1195.00 were taken out overnight. The subsequent rally rose to, and then took out the old contract high at 1196.80, making an intraday spike high to 1200.50.
So what’s ahead? The intraday chart shows a second attempt to rally over the old 1196.80 contract high failed (so far). I’d watch the first low off the high (1191.20) as the first support area. Yesterday’s high of 1185.00 would be the next real support. 1182.80 is the midpoint of today’s rally, and a lower close (1182.30) would be disheartening for the bulls.
Breakout rally-can it follow through?
On the upside, we should watch for a close over the old contract high to give the bulls more strength. A solid move over $1200 would be especially bullish as gold would move higher into uncharted territory.
For more information on trading breakouts in futures, check out my Breakout Futures Trading Method book here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
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