Sunday, July 31, 2011

Gold Look at the Week Ahead 7/31

(Chart 1 - Gold Daily SStoch, RSI, MACD Divergence)
(Chart 2 - Gold Daily Zoom)
(Chart 3 - Gold Daily)

Compare chart 1 to the price action on charts 2 and/or 3.
See how the momentum indicators in chart 1 make lower highs as gold makes higher highs in price at the same time?
This is a sign of impending weakness.
Furthermore with this point, SStoch and RSI are both in traditional "overbought" territory (+80 and +75 respectively).

One can also see that gold is governed by 3 bullish channels.
We are in the top 1/4 of all 3, which is an additional measure of being overbought
Furthermore, the latest daily bar has a nice upper wick after stalling at the 1640 resistance

Based on all this, I would say gold is a sell here. However, I usually like to have a nice shooting star in the price before I go short. I would sell here if you are aggressive with a 1650ish stop. I would sell a break of 1609 if you are conservative.

If this is indeed a top for the moment, then I expect price to fall to 1562.5 initially, and 1480-1500 finally.

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