Autochartist - Latest Chart Patterns
Weekly discussion and analysis of chart patterns from our partners at Autochartist.
Weekly Commodities Update: Gold
Gold continues to trade inside of a relatively tight range as broader markets have given few clues to the long-term direction of the world economy so far this year. As equities and bonds hold firm, commodities continue to waver between fears of a global slowdown and concerns over possible inflation, geopolitical instability capped off by the West’s war footing against Iran, and a strong investor appetite for safe-haven assets. Gold appears to be benefiting by the uncertainty with a slight bias to the upside. Last week’s close added to the favourable outlook by confirming a technical breakout identified by Autochartist.
After successfully testing the long-term key support level near $1550 per ounce, the market rebounded higher to affirm that the multi-year bull market remains intact. The $100 rally from the lows confirmed the uptrend and set the stage for a possible retest of last year’s highs.
The near-term pull-back from $1660 per ounce gives us the flag chart pattern illustrated here on the hourly candlestick chart. The pattern scores eight bars for overall quality, and ten bars for the initial trend reading to highlight the position of this formation within the larger uptrend. The high scores add to the probability of a follow-through commencing from Friday’s breakout.
The breakout occurred on a decent five-bar momentum reading after a very shallow pull-back inside the flag. With the top of the flag representing the major resistance level on the chart, the price is likely to move towards the projected price target. This suggests a minimum move back to the $1650 level, with a possible continuation to a new swing high above $1668 to complete the breakout.
A failure to advance from last week’s close would call into question the timing of the breakout, but a move below $1620 would still be needed to fully negate the pattern and set up a test of the flag support at the lower trend line.
Weekly Forex Update: GBP/CHF
GBP/CHF has recently completed the clear rising wedge chart pattern. Autochartist measures the overall quality of this chart pattern at the six-bar level as a result of the lower initial trend (rated at the four-bar level), above-average uniformity (six bars) and substantial clarity (eight bars). This chart pattern continues the prevailing downtrend that can be seen on the daily, weekly and the monthly GBP/CHF charts.
Both of the connecting points of the upper resistance trend line of this chart pattern (points A and B on the chart below) formed when the pair failed to break up above the strong resistance area, lying at the intersection of the following resistance levels: 1.4700 level of resistance, 50% Fibonacci retracement of the preceding sharp weekly downward price impulse from August of 2009, as well as the longer-term downtrend resistance trend line drawn from the start of the aforementioned preceding weekly downward price impulse (as is shown on the second chart below). The pair has recently broken down through the lower support trend line of this rising wedge with the breakout, whose strength is measured at the maximum ten-bar level. GBP/CHF is expected to continue downward movement in the direction of the forecast area set between the 1.4121 and 1.4334 price levels.
The following weekly GBP/CHF chart shows the technical price levels which have affected the recent movement of this currency pair.
Weekly Index Update: EU Stocks 50
Two failed attempts to breakout through the recent top at 2398.65 on the EU stocks 50 chart has helped form the resistance level of an ascending triangle chart pattern on the 240-minute chart. A spike bottom at 2308.65 also contributed to the formation of the uptrending support level and the creation of an emerging pattern. Since the initial trend at the onset of the chart pattern and the last bottom produced a support level, Autochartist is calling for a continuation trend change to the upside. The gray arrow indicates that since this is an emerging pattern, this is only speculation at this time.
The overall quality of this chart pattern is a below-average four bars. The initial trend is also below average, indicating a weak trend. The uniformity indicator searches for the presence of equidistant tops and bottoms, as well as the strength of the touches of support and resistance. Autochartist has identified this quality indicator as only average. The clarity quality indicator gauges the chart pattern’s strength based on the amount of market noise. This is typically measured by the number of market spikes and gaps. The clarity quality rating of four means that this pattern contains an above-average amount of these potentially damaging events.
Although the quality indicators may not make this chart pattern too attractive, the 129-candlestick length should draw trader attention. This is because the ascending triangle chart pattern becomes more interesting the longer a market stays inside of the support and resistance lines. The compression of these two lines is indicating impending volatility. Even though Autochartist is indicating a slight bias to the upside because of the direction of the initial trend, theoretically the index is set up to break out in either direction. The longer the market stays inside of the support and resistance levels, the more conviction traders are likely to have once it breaks out.
Disclaimer: the above comments do not constitute investment advice and IG Index accepts no responsibility for any use that may be made of them.
