Gold Closes the Pre-Christmas Week with Very Little Change

To give you a realistic idea of how quiet trading was this week with thinning volume as we move closer to the Christmas holiday next week consider this; with the exception of Thursday the opening and closing price was only a few ticks apart.

Thursday also was the only occurrence in which gold traded and closed above its 50-day moving average, for the first time since November 4^th.

Although the trading activity this week is best defined as narrow, it is not for a lack of fundamental events currently occurring in the political and financial arenas.

What we can say is that on a technical basis we have identified a unique pattern that is both a pennant formation as well as a flag formation. Although both patterns are different there is more of a commonality between these two formations than there are differences.

First and foremost, both patterns begin with what market technicians call the pole. That is a point in time in which the market moves in a near linear fashion in either direction  until it begins to trade sideways. In the case of a flag formation the market begins to move sideways with the highs and lows being parallel to each other.

In the case of a pennant formation rather than trading sideways in a parallel structure like a flag, the highs and lows form an asymmetrical triangle.

It is rare to see both sister patterns form at the same price point and time. But that is exactly the case of what we have seen most recently in gold if you look at the examples in the chart above you will see the textbook case of what this pattern should look like.

If you look at the gold chart above you can see how this most recent price action can be interpreted as both a bull flag and a bull pennant.

Wishing you as always, good trading,