Autochartist - Latest Chart Patterns
Weekly discussion and analysis of chart patterns from our partners at Autochartist.
Weekly Commodities Update: Gold
Gold futures slipped lower after a failed retest of key level resistance in last week's trading. The resistance at $1690 per ounce, highlighted by the Autochartist key level indicator, has now established itself as a significant overhead which may prove difficult to overcome in the near term.
The breakdown from the key level also triggered a technical breakout from a large Pennant chart pattern, shown here on the Autochartist platform's 240-minute time interval. This adds support to the case for continued selling pressure in the week ahead.
Gold has been buffeted by several conflicting forces in the broader markets over the last several weeks. The unfolding eurozone debt crisis is raising concerns among investors as to the safety of holding paper assets in the face of potential sovereign defaults. The reaction has so far been heavy selling in the equities markets, with US Treasuries benefiting from their perception as a safe-haven. Gold is viewed a viable defensive asset as well, though it is prone to weakness whenever a threat of economic slowdown drags down the commodities complex. This pressure is counterbalancing gold's otherwise bullish flight from paper investments.
The chart analysis arising from these opposing concerns reveals the Pennant formation which defines the wide trading range between $1670 and $1710 per ounce. The key level resistance represents the mid-point of the pennant, with traders using the level as a pivot point to establish long or short positions.
While the potential remains high for much higher prices in the long term, the chart will need to overcome the $1690 resistance to confirm the lows have been achieved. The breakdown below the pennant support after the last move through this pivot point leaves gold poised for a slide to new lows for the month. If the selling pressure carries over from last week, the projected price range places gold between $1634 and $1658 per ounce.
Weekly Forex Update: NZD/CAD
Autochartist has recently identified the high quality flag chart pattern on the daily NZD/CAD charts. The overall quality of this chart pattern is rated at the nine-bar level as a result of the maximum initial trend and clarity (both measured at the ten-bar level) and substantial uniformity (eight bars). The high initial trend reflects the sharpness of the preceding price impulse. This chart pattern continues the prevailing uptrend that can be seen on the daily and weekly NZD/CAD charts. The bottom of this chart pattern (point D on the chart below) formed when the pair reversed up from the combined support made out of the lower support trend line of this flag, the 50% Fibonacci retracement of the preceding daily upward price impulse (shown on the fourth chart below), as well as the horizontal support level 0.7735 identified previously by Autochartist (seen on the Key Levels chart below). The pair is expected to rise further in the coming sessions.
As can be seen on the following 30-minute Key Levels chart for NZD/CAD, the pair has been trading close to the horizontal support level 0.7735. This level is likely to be tested again in soon.
As can be seen from the following PowerStats chart, all of the daily expected price range for NZD/CAD for tomorrow (from 0.7686 to 0.7816) stands above the lower support trend line of this flag, which adds to the chance that the pair will rise in the near future.
The following daily NZD/CAD chart shows the technical price levels mentioned above.
Weekly Index Update: Germany 30
After reaching a bottom at 5365.30, the Germany 30 index has created a base at this support level, setting up a possible retracement of the break from Point B to the bottom. Autochartist has detected the formation of a 3-point extension Fibonacci pattern.
Although the main trend is down because of the lower-top, lower-bottom chart pattern, Autochartist is suggesting the start of a possible counter-trend rally into a series of Fibonacci retracement levels ranging from .382 to 1.618.
The 3-point extension Fibonacci pattern is a symmetrical pattern. This means that there is a price and time relationship between the rally from Point A to Point B and the break from Point B to the new support level. This is what allows Autochartist to make an accurate price forecast. The 3-point extension is also comprised of the basic Fibonacci ABCD or ‘lightning bolt’ pattern. When compared to the 3-point retracement Fibonacci pattern, one will notice that it ‘extends’ beyond Point A, whereas the former stops slightly above it.
Now that price and time symmetry has identified a potential bottom, traders should watch for the start of a rally. Short-traders may decide to close their positions while aggressive counter-trend traders may be looking for a fresh buy. Additionally, bearish traders may wait for the retracement to complete before initiating a short position. A typical retracement will take the market to the 50% to 61.8% retracement levels at 5747.05 to 5837.17. Counter-trend buyers should note that a Stop-loss is usually placed under the recent bottom since a move through this support level will negate the entire pattern.
Disclaimer: the above comments do not constitute investment advice and IG Index accepts no responsibility for any use that may be made of them.
