Wednesday, February 29, 2012

Let's Take a Look at Why Gold and Silver Collapsed

Did our Trade Triangle Technology get it right on these two metals?

With a Score of -60 on gold this market remains in a trading range. We would not rule out a pullback in gold to the $1,650 level. With our long term monthly Trade Triangle still in a negative red mode, we cannot get 100% excited about this market at the moment. We are not super bearish on this metal, we just need further confirmation with the tools we know are successful in trading gold. Long term term traders should be in short positions in gold with appropriate money management stops.

Gold closed sharply lower on Wednesday [April contract] and below the 20 day moving average crossing at 1745.50 confirming that a short term top has been posted. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are diverging and turning bearish signaling that sideways to lower prices are possible near term.

If April renews the rally off December's low, the 75% retracement level of the September-December decline crossing at 1825.20 is the next upside target. First resistance is Tuesday's high crossing at 1792.70. Second resistance is the 75% retracement level of the September-December decline crossing at 1825.20. First support is today's low crossing at 1704.50. Second support is the reaction low crossing at 1652.20.

A possible outside negative engulfing line for silver today, which is surprising given the market action yesterday. We want to be patient and wait to see if this actually happens on Thursday and Friday. Our long term monthly Trade Triangle remains positive on silver. This particular indicator has done extremely well in the past. Long and intermediate term traders should be holding long positions in silver with appropriate money management stops.

Silver posted a key reversal down [May contract for silver] on Wednesday as it consolidates some of the rally off December's low. The low range close set the stage for a steady to lower opening on Thursday. Stochastics and the RSI are overbought and are turning neutral to bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 34.306 would confirm that a short term top has been posted.

If May extends the rally off December's low, the 75% retracement level of the August-December decline crossing at 39.521 is the next upside target. First resistance is today's high crossing at 37.580. Second resistance is the 75% retracement level of the August-December decline crossing at 39.521. First support is the 20 day moving average crossing at 34.306. Second support is the reaction low crossing at 32.715.

Just click here for your FREE trend analysis of gold ETF GLD

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