Hi friends hope you are well and welcome to the new update on gold prices. As gold has reached highest price level in its history therefore in today's article we will try to understand whether the price action will grow more it will be crashed.
If we take a look in the past then the gold reached the highest price ever in its history back in 2011. If we take a closer look at the weekly chart. Then at that time the price action of gold formed an up channel that was started in September 200. Finally in August 2011 the price action broke out the resistance of the up-channel in the meanwhile it also reached at the highest price ever in its history. Then priceline re-tested the previous resistance of the channel as support but could not retain this support and re-entered in the channel. Then the price action broke down the support of the channel and re-tested the previous support as resistance but could not re-enter in the channel again and moved more down and never returned.
The current up channel
Now if we watch the current move the price action then it has again formed an up channel same as like the previous move of 2011. Finally the price action has broken out the resistance of the channel and in the meanwhile, the price line has again achieved the highest price ever in its history. Now there is a strong possibility that the price action of gold will re-test the previous resistance of the channel as support and if this re-test will be successful then we can expect the next powerful bullish rally. But if the price action will be not successful in re-testing the previous resistance as support then it can again re-enter in the channel and test the support of this channel.
The SMAs are lifting the priceline:
Now if we watch the different simple moving averages on the same weekly chart then we can observe the smallest time period moving average 25 is above all then we have 50 then 100 and then 200 is below all other SMAs. Therefore a complete opened alligator mouth by the simple moving averages has been formed. That is lifting the price action up in a parabolic way.
Now if we move back in 2011 then we had the same opened alligator mouth by the simple moving averages formed. Then after reaching the highest price the priceline the price action re-rested these moving averages as support but could not retain these SMAs supports and moved down.
An expected Cup & Handle move:
If we take a closer look on the weekly chart. Then after reaching the highest price ever in the history of gold back in 2011 the price action found strong resistance at $1912. Then it move down and found the support at $1061. From this support the price action again moved up reached at the previous resistance level. In the previous week the price action could not break out the resistance and move down and in the current week the price action is again trying to break out this resistance of $1912.
This down and the upward move has formed a round shape that can be the body of a perfect cup & handle pattern. If the priceline won’t be able to break out the resistance of this cup then we can expect another rally to the downside that will complete the formation of handle of cup. If we take the retracement from the bottom of the cup upto the resistance. Then the price action can be reached between 0.382 to 0.786 Fibonacci retracement level. And from there we can expect the other rally to the upside that can even make another attempt to break out the resistance of the cup.
Conclusion:
Even though from the smaller time period up to the long time period all indicators and patterns are bullish. However, if the price action will follow the previous trend of 2011 or it will go to form a cup & handle pattern. Then we can expect a very strong rally to the downside. Therefore we should use the support of the channel as stop loss to minimize the risk factor.
If we take a look in the past then the gold reached the highest price ever in its history back in 2011. If we take a closer look at the weekly chart. Then at that time the price action of gold formed an up channel that was started in September 200. Finally in August 2011 the price action broke out the resistance of the up-channel in the meanwhile it also reached at the highest price ever in its history. Then priceline re-tested the previous resistance of the channel as support but could not retain this support and re-entered in the channel. Then the price action broke down the support of the channel and re-tested the previous support as resistance but could not re-enter in the channel again and moved more down and never returned.
The current up channel
Now if we watch the current move the price action then it has again formed an up channel same as like the previous move of 2011. Finally the price action has broken out the resistance of the channel and in the meanwhile, the price line has again achieved the highest price ever in its history. Now there is a strong possibility that the price action of gold will re-test the previous resistance of the channel as support and if this re-test will be successful then we can expect the next powerful bullish rally. But if the price action will be not successful in re-testing the previous resistance as support then it can again re-enter in the channel and test the support of this channel.
The SMAs are lifting the priceline:
Now if we watch the different simple moving averages on the same weekly chart then we can observe the smallest time period moving average 25 is above all then we have 50 then 100 and then 200 is below all other SMAs. Therefore a complete opened alligator mouth by the simple moving averages has been formed. That is lifting the price action up in a parabolic way.
An expected Cup & Handle move:
If we take a closer look on the weekly chart. Then after reaching the highest price ever in the history of gold back in 2011 the price action found strong resistance at $1912. Then it move down and found the support at $1061. From this support the price action again moved up reached at the previous resistance level. In the previous week the price action could not break out the resistance and move down and in the current week the price action is again trying to break out this resistance of $1912.
This down and the upward move has formed a round shape that can be the body of a perfect cup & handle pattern. If the priceline won’t be able to break out the resistance of this cup then we can expect another rally to the downside that will complete the formation of handle of cup. If we take the retracement from the bottom of the cup upto the resistance. Then the price action can be reached between 0.382 to 0.786 Fibonacci retracement level. And from there we can expect the other rally to the upside that can even make another attempt to break out the resistance of the cup.
Conclusion:
Even though from the smaller time period up to the long time period all indicators and patterns are bullish. However, if the price action will follow the previous trend of 2011 or it will go to form a cup & handle pattern. Then we can expect a very strong rally to the downside. Therefore we should use the support of the channel as stop loss to minimize the risk factor.
