Autochartist - Latest Chart Patterns
Weekly discussion and analysis of chart patterns from our partners at Autochartist.
Weekly Commodities Update: Gold
Gold futures tumbled in heavy trading last week to reach their lowest level in several weeks. With traders eyeing the sell-off as a possible buying opportunity, the start of trading in the week ahead may be an important indication of the longer term direction the market is taking. Autochartist is picking up some clues in the technical formations on the intraday charts.
The major development last week was gold’s break of key support at the $1760 per ounce level, which triggered a sell signal on the Autochartist key level identifier. This proved to be a meaningful price point as momentum selling took hold and a $50 per ounce decline ensued. After achieving the forecast target, a mild short-covering bounce brought the price off the lows in Friday’s session.
This bounce created a swing low where the price can now pivot for a retest of the key level support at $1760. If this plays out, it will diminish the weight of the sell-off in the overall chart pattern and suggest this was merely a corrective move in the uptrend, which began from the $1600 per ounce bottom. A move above the key level, now acting as resistance, is needed to revert to the bullish technical outlook. Traders will be watching the strength as it approaches this level for a potential upside breakout.
On the 15-minute candlestick chart, the bounce from the lows is identified as the flag pattern illustrated here. The pattern is clearly setting up a resistance zone at the upper trend line, with the slight strength going into Friday’s close leaving gold well-positioned for a retracement back to the key level. This would materialise as a breakout from the flag, generating an upside forecast in the vicinity of the $1760 resistance.
If selling pressure resumes in the week ahead, a slide back into the flag with an eventual move to support below $1710 would be expected as the pattern continues to develop. This would suggest additional weakness and the possibility of an eventual collapse back to the $1600 level.
Weekly Forex Update: USD/SGD
USD/SGD has recently completed the clear triangle chart pattern identified by Autochartist on the 30-minute charts. The overall quality of this chart pattern is measured at the five-bar level as a result of the low initial trend (rated at the two-bar level), average uniformity (five bars) and higher clarity (seven bars). This chart pattern developed in accordance with the ongoing longer-term daily upward correction which started when the previous strong downtrend reversed up from the major support at the round price level 1.2000. The upward price impulse from the support at 1.2000 was followed by the ABC correction which has recently been completed by this currency pair. The bottom of this ABC correction (the end of its C sub-wave) formed when the pair reversed up sharply (with the Japanese candlestick morning star pattern) from the combined support area of the 61.8% Fibonacci retracement of the previous upward price impulse from 1.2000, and the lower daily Bollinger band (shown on the second chart below). The pair is expected to rise further in the direction of the forecast area set between price levels 1.3014 and 1.3054.
The following daily USD/SGD chart highlights the technical price levels mentioned above:
Weekly Index Update: US SPX 500
The US SPX 500 index formed a three-point extension Fibonacci pattern on the 240-minute chart, setting up a possible retracement of the swing from Point B to the recent bottom. This particular pattern offers opportunities for both the trend trader and the counter-trend trader.
The three-point extension Fibonacci pattern is made up of three-fourths of the ABCD pattern, sometimes called a ‘lightning bolt’ pattern. Its counterpart is the three-point retracement Fibonacci pattern. The difference between the two is the swing from Point B to Point C. With the three-point retracement Fibonacci pattern, the break from Point B to Point C is only a partial correction of Swing A to Swing B. The three-point extension Fibonacci pattern actually ‘extends’ the break from Point B to Point C through the previous bottom at Point A.
With the US SPX 500 the top at Point B at 1273.90, it completed its downswing at Point C, or 1208.90. This move took out the previous bottom at Point A (1221.46), confirming the downtrend. Perhaps it was oversold conditions or the price reaching a value area, but traders established a support point. With new support created at 1208.90, Autochartist is forecasting a retracement of the break from Point B. The forecast levels include the key .382 price at 1233.73, the .500 price at 1241.40 and the .618 retracement level at 1249.07.
This Fibonacci pattern should be attractive to trend and counter-trend traders. Trend traders may want to exit already established short positions and wait for a retracement to re-establish their bearish positions. Aggressive traders may choose to play the long side, looking for a counter-trend rally into the retracement levels.
Disclaimer: the above comments do not constitute investment advice and IG Index accepts no responsibility for any use that may be made of them.
