Tech musings - commodities

 Before I start with my today’s post, I want to clarify to my readers that it is entirely possible for a technical analyst to have a different long term view and short term view. For example I have been long on gold since January 2008 but have given tactical short call on gold in August 21, 2011. The primary trend on gold was still up but charts indicated that gold was up for some serious correction. Since then gold made a low of 1520 and is consolidating between 1600 -1700 levels since last 16 months.

Similarly in my post on 8th September 2012 I have given my long term view on gold which I will summarize as follows, “Investors can go long on gold with a stop loss of 1500 and target of 2100.” At that time I was expecting that gold will break above 1800 USD level which is a major resistance and was mentioned in my post on 4th June 2012. But Gold has been unable to break above 1800 levels and it is showing significant bearish signs.

In the due course of my mail I will discuss the current pattern and target for gold but I want to reiterate that primary trend in gold is still up and will remain so unless gold breaks below 1000 USD levels on monthly closing basis. I am not bearish on gold and the current post only explores a tactical opportunity to go short on gold with strict stop losses.

If we look at the first chart which is the weekly chart of gold we can see that gold attempted to break above 1800 levels but failed. Since last 13 weeks it had been consolidating between 1650 to 1750 levels.   Since gold has made a lower high the structure is looking very bearish and it seems that gold will break below the recent lows of 1670’s.

Gold Weekly chart

If we look at the second chart we can see that October was a negative month for gold, November was doji and the current month has formed an open high candle. I think that current month will see a large correction in gold prices and it may push prices towards 1600 or 1520 levels. 

 

Gold Monthly chart

If we look at the quarterly chart in Gold we can see that Gold has failed to move above 1800 USD levels since last 5 quarters which means that any sustained upmove in gold is possible only if gold closes above 1800 USD on monthly basis.

On the other hand it is also challenging channel line and if gold closes below 1500 levels for this quarter I will assume that the trend line is broken.  In that case gold will find support at 1285 – 1320 levels which is 38.2% retracement of the entire upmove and at 1080 levels which is 50% retracement of the entire upmove.

The primary trend line as seen in the chart will also prove to be a crucial support at 1050 – 1100 levels. Here I am not implying in any sense that Gold will fall to these levels but these are still possibilities (although having very low probability). 

Gold Quarterly chart

So readers can sell gold at current levels 1695 and keep 1730 on daily closing basis as stop loss with a target of 1600 to 1550 levels.

Similarly if we look at silver it is facing resistance at 35.50 and has support at 27 levels. Readers can sell silver at CMP 32.53 with a strict stoploss of 34.40 and target of 27 – 29 USD

  

Silver Weekly Chart

As readers are aware that I have been negative on Nymex crude since last few months but the prices have been stickier compared to my expectations. If we look at the given chart of crude we can see that the 82 – 86 is a very important support for crude. If the prices break below this level it will correct sharply to 70 levels. People can hold their short positions with a stop loss of 95 and target of 70 USD.

Crude Monthly chart

Summary

1.       Sell gold at 1695 stoploss 1730 and target of 1550 – 1600 USD

2.       Sell silver at 32.50 stop loss of 34.50 and target of 27 – 29 USD

3.       Sell crude oil at 86 stop loss at 95 target 70

** I reiterate that I may have long or short positions in any of the stocks/commodity/currency/ asset discussed in any of my blog. Readers are advised to consult a qualified financial adviser before acting on any information mentioned in my blog. Any decision based on my post is solely your responsibility.