May 5, 2011 – Gold is Challenging its 2011 Bullish Momentum And Rising Channel
Simple Moving Average(SMA) 200-period (bold, gray)
RSI-14 with Simple Moving Average 5-period of RSI attached.
Elliott Wave Principles
Market and Price Action (patterns, candlesticks)
Intraday pivots and Intermediate-term support and resistance
Multiple Time-frame Analysis
Short-Term to Medium Term
– Gold is not declining as sharply as silver, but is nonetheless showing a strong reversal developing.
– The 4H Chart shows a test of the 1476.95 pivot, 200SMA, and a rising channel support(also in the Daily chart).
– The momentum in the short to medium term has turned bearish.
– With the current acceleration downwards, the decline looks to be in the third wave within a third wave – the strongest part of a bearish impulse wave.
– Looking at the daily chart, gold is indeed showing some very bearish days, but the momentum is still above 40. It is being challenged though.
– We have a 50% retracement of the rally since approx. 1390. We are also at 38.2% retracement of the rally since approx. 1305.
– Adding to those support factors is a rising channel support.
– Gold still has a chance to turn bullish, and if it breaks back above 1500, there is a chance for continuation. A break above 1575 targets 1585 in the near-term, and 1650 in the long-medium term.
– However, the structure of the current design suggests that even if it will be bullish in the long-medium term, the short to medium term action is likely going to see very a complex correction as the current wave down would only be a wave A of a conventional ABC correction.
– Further bearish outlook opens up if the market not only breaks below the current support cluster, but remains below 1500, and then breaks below 1450 support cluster. Then, there is one more challenge against the rally that can reverse gold, and that would be a break below a larger channel, with support near 1410, and 61.8% retracement of the rally since 1305.
– A break below the large rising channel suggests a return to the 1305 pivot.
Will this be another USD/CAD to fade, as we saw a similar rally at the beginning of March? Subscribe and become a member to share your views and join live discussions as well as webinars about the markets.
Fan Yang CMT
Chief Technical Strategist