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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Fri Feb 16, 2007 1:19 pm Post subject: Gold is looking overbought in the short-term and could corre |
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We have seen the breakout predicted in the last Gold Market update, although so far subsequent gains have been modest as gold continues to be restrained by the strong resistance level shown on the 1-year chart in the $655 - $680 zone. Although we have seen limited gains so far following this breakout, it was nevertheless an important technical development that is viewed as marking the start of a major uptrend which is still in its infancy.
The open question now therefore is whether gold will go on to break above $680 soon, which would be expected to lead to a rapid run at last year's highs in the $730 area, or whether it will first react back towards the third fan line, which happens frequently after a breakout from one of these 3-arc fan patterns.
Gold has had a significant runup in the 5-week uptrend that began at the early January lows, and is now substantially overbought as shown by its Stochastics, making it vulnerable to a short-term reaction, especially as it is still in a zone of strong resistance, which would actually be a positive development in a sense, as long as it didn't go too far, as it would unwind the overbought condition and thus put gold in better position to stage a convincing breakout.
The RSI and MACD lines are not seriously overbought, on the other hand, and given that an overbought condition as shown by Stochastics can persist for a considerable time, gold may just go ahead and break above $680 soon anyway, overbought or not. Should gold react soon it is important that it does not break below the 3rd fanline and below the upper trendline shown on the long-term chart below. At this point in time these lines are crossing at about $630, with the 200-day moving average just beneath, making this an important support level where we would expect the price to find support on any short-term reaction.
http://www.marketoracle.co.uk/Article353.html |
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Quinn
Saving Enthusiast
Joined: 06 Feb 2005
Posts: 181
Cash Points ££ 2817.02
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| Posted: Mon Feb 19, 2007 3:03 am Post subject: |
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Wishful thinking me thinks  |
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