From the May 01, 2010 issue of Futures Magazine • Subscribe!

Tech talk: Gold long-term bull

The old trading adage, “The trend is your friend” has survived for a reason. Most successful veteran traders proclaim it to have sound merit. And an examination of the longer-term weekly and monthly price charts for nearby Comex gold futures reveals the precious yellow metal has been and remains in a longer-term up-trend and there are no early technical clues indicating a change.

The weekly continuation chart for nearby gold futures reveals prices are in a 17-month-old up-trend, from the October 2008 low of $681 an ounce. Also, price action on the weekly gold chart the past six months has produced a potentially bullish symmetrical triangle pattern (see “Ready for a breakout”). Symmetrical triangles are continuation patterns. Given that the dominant trend on the weekly gold chart is up, technical odds favor a bullish upside “breakout” from the triangle pattern, which would propel gold to a fresh all-time high. The present all-time high in nearby Comex gold futures is $1,227.50, scored in December of 2009. The weekly gold chart shows strong technical support at the $1,044.50 level, with strong technical resistance located at the record high of $1,227.50.



The monthly continuation chart for nearby gold futures shows that an accelerating nine-year-old up-trend is firmly in place, from the April 2001 low of $255 an ounce (see “Golden decade,” page 27). If gold futures push to a new high this spring, that would trigger higher volatility. If a new high is set, the next technical resistance level would be a nice round number, something around $1,500 an ounce.

Jim Wyckoff is the proprietor of the “Jim Wyckoff on the Markets” analytical, educational and trading advisory service (www.jimwyckoff.com ). He is also a technical analyst for Dow Jones Newswires and the senior market analyst with TradingEducation.com

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