Bullish reverse head and shoulders nearly formed on gold – target is $1700 if it is confirmed
After the 100 day moving average failed to hold, quickly followed by the 55DMA giving way, there really is only one technical formation that is probably keeping the bears from trying to push the gold price much lower, and possible fresh lows if ‘the squid’ is to be believed.
There seems to be a pretty clear (sloping) reverse head-and-shoulders forming in gold. Explaining a reverse H&S pattern from Investopeidia:
A chart pattern used in technical analysis to predict the reversal of a current downtrend. This pattern is identified when the price action of a security meets the following characteristics:
1. The price falls to a trough and then rises.
2. The price falls below the former trough and then rises again.
3. Finally, the price falls again, but not as far as the second trough.
Once the final trough is made, the price heads upward toward the resistance found near the top of the previous troughs. Investors typically enter into a long position when the price rises above the resistance of the neckline. The first and third trough are considered shoulders, and the second peak forms the head.
And here is what a reverse H&S should look like:
And here is a ‘real world’ example using the Alaska Air stock price:
And here is the chart for gold (daily) – note the amazing similarity between the two:
As you can see, we could see the gold price drop all the way to around the $1250 level and the technical pattern would still be intact – and given that the Fed’s ‘taper’ decision is coming tomorrow (with a likely $10bn-$15bn reduction in printing), volatility will be very high, and a brief ‘pop‘ to around $1250 could easily come – a failure at that level however, and we’re going back to retest the $1180 lows from the end of June.
The sloping neckline is around the $1420 level – a break above the neckline, followed by a retest of the neckline (as support) would confirm this pattern, and gold would be off to the races.
So just how far can gold go if/when this reverse H&S is confirmed? A ‘typical’ reverse H&S will see gains equal to the distance between the ‘head’ and the ‘neckline’:
Around the $1700 mark.
As long as that $1250 level holds on any volatility in the next few days, this technical indicator will remain fully intact, and is probably giving the bears some pause for thought – we should know if this revers H&S patters is confirmed in the next couple weeks.
Things might be about to get very interesting.
- Gold price trading back around $1700 – head & shoulders forming?
- Silver price spikes over $32 again as 15 month head & shoulders pattern forms on the gold:silver ratio
- Gold and Silver Form Promising Bullish Divergences
- Gold Market Remains Bullish
- Bullish Gold
Link to this article: : http://www.goldmadesimplenews.com/gold/bullish-reverse-head-and-shoulders-nearly-formed-on-gold-target-is-1700-if-it-is-confirmed-11729/