Gold and Silver Channeling Down – A look at Retracement Targets
By Fan Yang | October 26, 2012 1:36 PM IST
Gold 4H chart 10:20PM EDT 10/25/2012
Pattern breakout target: In the previous update, when gold, XAU/USD broke below a rising wedge, a target to 1715.22 was noted. This was a support/resistance pivot, and was the origin of the broken wedge. As we check the 4H chart during the 10/25 Asian session, we see that gold has been in a declining channel and has broken through the 1715.22 pivot, pushing slightly below the 1700 psychological barrier before bouncing back up above 1700.
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Bearish momentum and trend: The RSI has held under 60, and tagged 30 multiple times, reflecting persistent bearish momentum. The moving averages in the 4H chart also reflect a bearish trend with the 200 above 100, then 50, 21 and 8. In this bearish trend, there is some room to the upside. However, if the current trend persists, the RSI should hold under 60, and price should hold under the projected channel resistance.
Reversion Target: The daily chart shows where some lower fibonacci retracement levels are. The 50% retracement and 200-day SMA represent reversion back to the mean, so a possible target for the current downtrend is the 1650-1662 area.
Gold Daily chart 10:30PM EDT 10/25/2012
Silver 4H chart 10:40PM EDT 10/25/2012
Double top target hit: Silver has a similar look in the 4H chart. It has almost reached a double top breakout projection of 31.50 (my chart shows a 31.51 low). The momentum (RSI) and trend (SMA alighment) is similar to that of gold, so there is also some room to the upside toward channel resistance and for the 4H RSI to reach 60, before the downtrend in the 4H chart is tested. This is probably around the 32.50 clip. A break above 32.50 therefore shelves the bearish outlook provided by trendlines and momentum signals and the moving averages. Otherwise, we can still focus on lower support levels.
Reversion Target: For a break below 31.50, XAG/USD exposes the next fibonacci retracement (50%), at about 30.75. The 200-day SMA is at 30.50. The target for reversion back to the mean is therefore 30.50-30.75.
Silver Daily chart 10:45PM EDT 10/25/2012
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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