Thursday, September 25, 2014

Gold Stretched – Ready for Bounce

Gold has made 15 new lows without a three session pause in its descent from nearly $1297.60 to 1206.60 earlier today, a drop of 7%.  It is terribly stretched.  A downward sloping trend line dating from late-August has largely held sway, keeping price action inside a rather tight downward path.  That tight band threatens to be broken today with a settlement above 1218.43.  Such a settlement would indicate a loss of bearish momentum.

Further, CFTC described ‘non-commercial’ accounts have been liquidating longs since mid-August, removing more than half of their once 166k holding.  This long liquidation may indicate fewer remaining with an interest in removing short positions.

Finally, today’s candlestick currently represents a bullish hammer.  This followed a similar hammer pattern on the 14th new low earlier this week.  In between, there has been a bullish inverted hammer.  The chance for a bullish reversal is strong.  Such a reverse could take bullion back to 1300 or higher.  A long from this level 1221 would risk a settlement below the aforementioned trend line for the extremely risk adverse or with a settlement below Tuesday’s opening level of 1214.9 if he were more willing to allow for some additional noise. 

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