Today’s article for the Technician’s Edge column at the Green Faucet Financial Website is entitled “Gold Successfully Defends Critical Support,” where I define why $1,075 is the critical level to watch and how today’s bounce - and potential rally from this point - was anticipated from this support level and a lower timeframe positive divergence.
Here is a daily chart showing why the $1,075 level is important to watch:
Starting with the July 2009 lows near the $900 level and stretching to the December highs of $1,200 per ounce, we see the 50% Fibonacci retracement rests at the $1,075 level.
In addition to that level being important, we see the daily chart’s lower Bollinger Band acting as a confluence level with a prior price low from December along with a prior swing high from October 2009.
In the article, I also show how a positive momentum divergence on the intraday timeframe preceded today’s rally and gave us clues that odds favored a rally off support… but that if support broke, then the next target would be the $1,000 level.
This serves as a great example of how to combine a daily critical support level with a ‘hidden’ internal (intraday) positive momentum divergence and 5-wave Elliott Fractal count (for those so inclined) tipped the odds in favor of a rally off support.
I discussed the critical support level in a post last Friday entitled:
“Critical Line in the Sand for GLD and Gold.”
I also explained this liklihood in more detail - along with how other major markets are likely to move to key targets or levels - in this week’s Weekly Intermarket Report for members.
Continue watching gold to see how far this rally can last - as buyers already are off to a great start from bouncing sharply off the key support level - breaking lower timeframe moving averages and forming a powerful new momentum high (in the 3/10 Oscillator).
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
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