The Bullion News & Commentary Continues...
Posted 04/24/2016 @2:48am - Last Edited 04/24/2016 @3:17am
First, I want to acknowledge that the reverse head and shoulder's
pattern, I thought that was forming in last week's charts, did not form and won't form.
However, Silver did stay above its long-standing falling resistance
level, which it broke on 4/15. You can see last week's analysis here.
For the last two weeks, I've read what other analysts have posted about gold and silver and it's been mostly negative.
Here are the two analysis reports that I will be comparing my analysis, in this post:
In their analysis, they say gold hasn't broken out of its long-term falling trend-line, which it has and I'll show you.
They also fail to recognize the 'cup and handle' pattern in the gold and silver charts, which I have mentioned in the past, but I will go more into detail with this post.
Furthermore, in their analysis, they mention gold and silver's COT charts are at their extremes. I will also address this.
First, a few weeks Gold broke above its long-term falling resistance level, other analyst's say "no, it hasn't", I say "yes, it has" and I'll show you where they are wrong.
On 4/08/2016, I posted the chart below showing that gold broke above the long term trend-line that other analysts say it hasn't broken.
chart courtesy of TradingView.com
So what's the difference from my analysis to theirs, in their analysis of
gold's chart they use the 'highs and lows' of a candlestick, whereas I
use the 'open and close' of a price candlestick, in all of my analysis.
The candlestick diagram to the right shows you the difference between 'Open & Close' from 'High & Lows', (this diagram was taken from this Guide's Quarterly Charts & News page).
The wide parts of the candlestick is called the 'real body' and the thin lows and highs are called the shadows.
For me, it doesn't make sense to follow a shadow to analyze price charts, I've had more success following the candlestick's real body to get an better idea of how the price chart is going to move.
In the chart above, I show the trend-line being broken using the real body of the candlestick.
After recreating their charts, using the candlestick (shadows) 'high's and low's, I can show that gold has broken this resistance level
more than once.
Here's a closer look...
As you can see no matter how you draw the falling resistance line, it's
One last thing about the highs and lows (shadows) on a candlestick, I do find them useful for some analysis, just not for support or resistance trend-lines.
Next, I want to discuss the cup and handle pattern in both the gold and
Cup and Handle price chart patterns are a bullish indicator.
Up until about 10years ago, I basically only followed stock charts, however, all chart patterns are the same whether you are looking at a stock chart, commodity chart or currency chart.
Meaning a 'cup and handle' on one chart acts the same way on all the
charts, just like head and shoulder's patterns, wedges, pennants, etc.,
For instance, the chart below is of a cup and handle pattern that formed in McDonald's stock price chart in 1998.
As you can see in the chart above, the corrective phase of the
'handle' portion of the 'cup and handle,' falls below the top of the cup.
In the chart below, you can see that Silver's cup and handle, has already filled this pattern.
After silver broke above its long time resistance level, on 4/15/2016,
it continued to move higher finding resistance at $17.00.
Next, in the chart below you will see that gold still needs to fill in its corrective 'handle' phase of the 'cup and handle' pattern.
For Gold and silver's long-term market, I believe we have finally entered
a new bull market.
However, this is where I turn bearish on gold and silver, for the short-term I expect silver and gold to pull back in price from profit taking for at least the next week.
During this profit taking process, gold should fall back to one of the
three levels shown in the cup and handle chart above.
After gold has finished correcting, I expect to see it move up like silver did recently after it completed its "cup and handle pattern.'
Before I go on to the COT reports, I want to show you another reason I've turned bearish, short-term, on the precious metals.
The reason being, the U.S. dollar has recently changed direction and moved upward.
In the chart below you can see that it moved up from a falling wedge, this is a bullish move for the U.S. Dollar.
I was going to post this dollar chart last week, but I wasn't sure how
the ECB was going to use their authority and it wasn't clear which way the dollar was going to move until after their meeting on Thursday (04/21/2016).
In the chart above I've highlighted where the U.S. Dollar broke above
its falling wedge.
Furthermore, I also have pointed out the resistance levels that the U.S. Dollar will have to over come to continue to move higher.
(I will give more of my thoughts on the US Dollar's future when I post the '1st quarter of 2016' page.)
For the last few weeks, I've been reading how negative other
analysts think the COT reports are, I haven't agreed with them until
now, but my bearish views on gold and silver are only short-term.
The reason why I didn't agree with them was because I knew that the ECB was having a meeting on Thursday (04/21/2016) and traders were waiting to see what Draghi was going to do before the market changed direction.
I'm not saying it didn't look negative, I'm just saying I didn't think it mattered how it looked until after the ECB had its meeting.
The Fed meets next week (4/25 - 4/29), but everybody already knows they aren't going to do anything except change some wording in their statement and it has already been priced in the markets.
However, as far as all the bearish talk on gold and silver concerning their COT charts, right now I am following some patterns in the COT charts, but I am still watching them and if they come to fruition I will
share them with you.
In conclusion, I want to show you the support levels I will be watching
next week as gold and silver consolidate in price from profit taking.
The first chart is the Gold 'cup and handle' chart above, in it I show the support levels that the 'handle' could pull back to.
The next chart is of silver's support levels for the week of 4/25 - 4/29.
Lastly, I want to share this with you about all my analysis on the precious metals charts.
I will be as honest as possible with you on my perspectives and when I am wrong, I will admit it to you.
Furthermore, when I'm right I will try not to boast because I've learned the best boasting comes from the mouths of others and not your own.
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