XAU - Gold - signs of life?
FX_IDC:XAUUSD Gold Spot / U.S. Dollar
XAU remains in a downtrend, but within a bullish flag - so the downtrend continues to appear corrective. It bounced on queue and has moved back into a shorter term bullish wedge . The next couple of days will be important to see if it can remain within the wedge and then move higher - if it does we should see a move to the top of the flag. We are therefore not out of the woods yet but are seeing positive action. I remain long and will add once the flag has resolved - if we break down again I will not hedge until the flag is broken on the downside - if you are not in yet, then probably best to wait until the flag has been breached and look at GDXJ which also has a clear flag. Another chart to look at is SIL / QQQ which looks very interesting, and if resolved to the upside will be the signal to get out of tech stocks and into precious metals.
The price action in the bullish wedge is looking positive but we now need to see it break out north of the bullish wedge. If it can do this then it adds credence/validation to the bullish wedge with a typical fake out to the downside followed by re-entrace to the wedge and probability now favours break north of wedge - if this occurs we should see a test of the flag - the major confirmation will be the stocks (GDXJ/GDX) as they should start to pick up steam and lead ..
We remain in the bullish wedge which clearly has validity judging by how the price has been trading within the wedge. The probability based on this pattern remains for a positive outcome - we should know in the next few days. Wedges often have fake outs which may already have happened - if the price moves south of the wedge, there is still the flag to provide final support. The trend is down, but it still appears corrective - we should know within the next week.
XAU has very good price action. We could be breaking out of the wedge today. XAG has faked out to the downside but may be reversing. Something is going on..not there yet but volatility looks likely to pick up shortly judging by the price action - this will create good directional trading opportunities.
The bullish wedge looks very solid after this weeks action - big battle going on - it is a reversal pattern from a consolidation and we have both the bullish wedge and flag patterns in place as indicators that the move down from August is corrective. We have had the traditional fakeout to the downside and we are now trying to break to the upside. Patience is required before entering but the probability is increasing for a positive resolution - this is reflected in XAG which had a bullish hammer on Thursday and a fakeout to the downside on its penant (see my XAG chart) - it is also creating a potential reverse head and shoulders on the daily chart. We should know within the next two weeks what the outcome will be....