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team Graham Parlane

Chart of interest - gold, technically perfect?

Posted by Graham Parlane on 13 February 2013

Good morning

Two nights ago Gold dropped sharply, stopping out many of my ‘long Gold’ clients. The move through the previous low of US$1,651.00 was particularly sharp with stop losses at that level done with significant ‘slippage’ at $1,647.00. That slippage tells me, quite clearly, that my clients were not alone and the market on the whole was caught out on the drop (caught long).

This is classic market behaviour. If market participants are all sitting long then they are sellers on their next transactions, thus inhibiting moves higher. Now a large amount of those  longs have been forced out. Clearly the implication to me is that the market is now free to move higher…….

With that in mind take a look at the chart.

1)     The move down from the US$1797 high to the $1625 low was a prefect ‘Fibonacci’ 61.8% of the previous rally ($1527 to $1797).

2)     The latest 3 week pull back is again a perfect ‘Fibonacci’ number, this time a 76.4% move (my favourite ratio which I have observed often occurs before big moves – the depth of the move often confounding the most ardent bull – as is my base case here).

3)     Yesterday’s low stopped on the rising trend line from the aforementioned lows.

Big picture

XAUUSD – click here to view chart

A closer look

XAUUSD Closer Look – click here to view chart

No doubt this analysis is all a bit over the top for most of you but the end result could be a good buying opportunity with clear trading parameters if you are a gold bull (USD bear) like me.

G.

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