GOLD Technical: Trading: Gold prices rocketed to their highest level in five months, Bottom pattern seen
Technically, gold bulls are in charge. The near and intermediate term trends have turned bullish for gold in recent days. Trend following traders are jumping on the bullish bandwagon as the market now trades above its 20-day, 40-day and 100-day moving average, which is considered a bullish trend following signal.
It could be construed that action in recent months formed a very sloppy type of inverted head and shoulders bottom on the daily chart, with the "head" at the early November low. See Figure 1 below. The pattern is not text-book perfect, but it does argue that an intermediate term bottom has formed on the daily chart for gold.
How far could gold run on the upside? An initial target lies at the $1,298.40 per ounce level, the Aug. 28 high, which roughly corresponds with the $1,300 per ounce psychological target.
Beyond there, additional bullish objectives are seen at previous swing highs on the daily chart at $1,323 and then $1,347.30.
The near and medium term trends are bullish in gold. Upside targets are seen at $1,300 per ounce and beyond. However, the market is overextended and overbought, which could usher in a period of consolidation or correction at any time. Support lies at $1,256.20, the Oct. 21 swing high. As long as that support zone holds firm, the bulls will have the edge.
