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Gold Breaks Below Apex of Compression Triangle

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This week’s failure to close above $1300, is most likely signaling a conclusion to the current rally, and the beginning of a correction.

The chart below (figure 1) has an area highlighted in yellow, identifying a compressing range which has been the predominant characteristic since the beginning of this year.

Figure 1 is a 120-minute Heiken Ashi chart, commonly referred to as a Japanese average chart. On Friday, January 4th gold traded in an expanded range as it hit a high of $1300.40 before selling off and trading to a low of $1278 per ounce. The entire week of January 7th contained a series of lower highs, and higher lows, which formed a compression triangle. The week of January 14th was no different, all week the range continued to compress as current pricing approached the apex of the triangle.

On Friday January 18th, gold broke the support line created from the compression triangle. The chart below is todays price break (figure 2).

Figure 3 is a model based upon the rally ending at the resistance level at $1300 and beginning a correction. A correction here could push prices to $1267, or as low as $1247. A retracement to $1247 could be followed by a rally to $1320 per ounce. A retracement to $1267 could be followed by the rally which will take pricing above $1340 per ounce.

Wishing you as always, good trading,

Gary Wagner

 

 

Gary S. Wagner - Executive Producer