Gold Breaks Falling Wedge Pattern

Recently Gold broke upwards out of a classic Edwards and Magee style falling wedge. Often these patterns retrace with a rounding down towards the breakout but the strength of this move not waiting around for that only emphasised this advance means business.

The upside target of the falling wedge is the point where it started. In this case that's $1433 in spot gold. That's the minimum target. Another possible scenario is that the larger picture is forming a head and shoulders bottom with a neckline as shown above with a breakout currently around 1410. should the 1433 point be breached decisively that would imply a further approximately $280 rise to around $1700. I have to admit my view has been that gold is in a longer-term bear market but breaks of 1410 and 1433 would certainly change my view if sustained.

Volume and open interest appear to be increasing as the market rises which is another sign this is a market accumulating longs not covering shorts.

NZ Dollar false breakout

Well not all trades work out and this one certainly failed. The Kiwi only managed a small close above the head and shoulders pattern before reversing. That's why you have stops. Not all chart patterns come to fruition and I've had to admit defeat on this one. We await another formation. In hindsight I should have waited for more of a clearance on the breakout.

New Zealand Dollar breakout alert

The New Zealand dollar (Kiwi) has broken out upside ( triangle or Head and Shoulders pattern) with 85.80 now the target. Protective stops should be at 79.30.

New Zealand Dollar Breakout Watch

It's hard to tell if this is Triangle or a Head and Shoulders bottom formation. Either way we now have clear boundaries to watch for a break-out. The strength last week in the face of potentially damaging fall-out from the Fonterra (one of NZ's biggest exporters) China milk contamination scare was quite impressive and left the shorts scrambling to cover.

The momentum slowed a little towards the end of the week as the Kiwi approached the upper end of this formation.

A close above the 81.00 cent level would be an invitation to go long with a target of around 85.80.
Of course the other alternative is a resumption of the recent downtrend, and a close below 76.50 would suggest a move to the low 70's near 72.00 cents.

The patient will  wait for a breakout either way. I stress though a New York close outside the levels mentioned is needed. The Kiwi and Aussie have a history of making daytime breaks before closing back inside formations.

British Pound Bear Rally Before Next Plunge

Cable broke down out of the large symmetrical triangle I'd been watching with a convincing clearance. The strength of the subsequent rally surprised me but I'm convinced it's a bear market rally as just the start  in a much bigger downside move for the Pound.

My target for GBP/USD from the breakout is 0.3500 lower from the 1.5700 level where the triangle was first pierced. That's gives me a possible downside of around 1.2200 depending on where one measures the width of the triangle.

How far this current rally goes I'm not sure. A 50% rally from the breakout takes us back to 1.5600. A possibility. I'd watch for a break of the flag formation from the 1.4835 as shown on the chart for a sign the rally is over.

Remember I'm not a financial advisor so you should contact a registered one before making any trading decisions. Always trade with stops.

Aussie Dollar Patience Will Be Rewarded

One of the trading skills I've still to master is patience. Too often I've tried to jump into a market too early or taken profits too soon. As  a long-term trend trader patience is essential.

For a trend trader the AUD/USD ( much like GBP/USD did)  has tested the patience for a painful length of time. But I'm sure my patience will be rewarded when a break of the bboundaries in the above chart finally happens.

First will come a break of the more recent 1.0600 to 1.0200 range. An initial 4 cent range can be expected on a clear close outside this range. I don't know which way. It's not the way I trade. I try not to pre-judge. So on a break the minimum targets should be either 1.1000 or 98.00.

A much bigger move is possible if the larger symmetrical triangle shown is broken. At the moment the boundaries of the triangle are roughly 98.00 and 1.0500. So the upside boundary is so close to the rectangle 1.0600 that I think you'd just go with the 1.06 level as the breakout point. Interestingly the Aussie did break out just above the triangle to about 1.0580  for 2 days a few weeks ago but failed to close outside it for the week. The proximity of the 1.0600 and non-clearance of it would have served as a warning.

Using the larger traingle formation, a clear break of its boundaries would signal a possible hefty 16 cent move to either 1.22 on the upside or 0.82 on the downside.

Remember I'm not a financial advisor so you should contact a registered one before making any trading decisions. Always trade with stops.

More Carnage Ahead for Gold

In June I warned of the potential downside break of a descending triangle in spot gold. In April that has finally come to pass. Even though there has been a huge fall after breaking down through the 1525 level I'd be surprised if it's all over yet. There's been a strong rally off the 1300 level but it smells of a dead cat bounce to me. Just how far this rally goes I'm not certain. Potential exists for the market to test the breakout at 1525 but the rally has already been quite big. As long as the rally stops at 1525 or lower I believe we will see a retest of recent 1300 lows and a break of that  further down to at least 1250.The 1250 level would be the width of the rectangle within the Gold triangle ( 1800 to 1525 or 275 points) from the 1525 That would be the minimum I'd expect.

If we accept that the larger descending triangle is valid then the downside target is more like $1120 ( give or take a few dollars). Again that is the minimum downside count from a descending triangle. It could go lower but you'd look at taking profit there if still short.

Only a close above about 1530 would have me thinking the targets have failed. Silver has a similarly bearish count and I would be surprised if I didn't see $16 before this correction is over.

Bear in mind I'm not a financial advisor so talk to one of those before making any trading decisions.