Since gold flushed out some traders on the previous bearish “Head and Shoulders” pattern that was pointed out on the blog last week, gold made a rally to the prior support of the “Balance Area” around $1,755 an ounce and this acted as strong resistance.
I would have never guessed that over the past six weeks I would not have had a single entry for a swing/position trade in gold to the long side in the model swing/position trade portfolio, but there has not been a single order executed with my methodology. There is nothing wrong with preserving capital for future opportunities.
The last COT report in gold this past Friday showed the longs getting liquidated and the shorts closing out their positions in gold. Open interest declines in that scenario. Which side made a profit on their trade? The correct answer is “no way to know”. If both sides of this open interest were “Old”, or put on below $1,700 then the longs were taking profits, and the shorts were getting out with a loss. If both sides of the open interest closed out were “New” or put on near $1,800, then the longs took losses, and the shorts made money. The top of the blog has my interpretations of “Open Interest”.
Below $1,720 and the next level of support on the chart is $1,700. Perhaps a pattern will develop in the near term that will allow an entry to the long side above $1,720; perhaps it will be lower around $1,700. It all depends, and that is what being objective is all about. Trade what you see, not what you want to see. The Bulls have their work cut out for them as there is potential overhead supply on the daily chart for the time being. The path of least resistance is only higher above $1,800.
Friday’s chart pattern resembles a “Bear Pennant” on the 30 minute chart.
The Copper chart pattern is one to keep an eye on early next week in the metals arena. There is a very large parrallel Channel/Flag on the Daily chart and price closed just about on the return line/support of this pattern.
My last post on Gold can be found here: