![]() This daily line chart shows a little different chart pattern vs the bar charts above. As you can see the price action is testing the bottom of the big 20 month rectangle. Next lets look at a 2 year daily line chart that shows the big horizontal trading range that gold has been in since the fall of 2011. If the backtest doesn’t hold on the triangle pattern, that I showed you on the chart above, then I would expect a more horizontal trading range to progress with a move up to the top red rail around the 156.50 area. Sometimes a horizontal trading ranges can be a little sloppy where the price action can trade slightly below or above the horizontal rails and then move right back in to the rectangle. Lets look at another daily chart for the GLD that shows a potential horizontal trading range similar to the one that formed just above our current one. A failure right here would confirm the red triangle as a valid consolidation pattern. ![]() Again if the price action can trade above the bottom red rail that would be short term bullish for gold. ![]() You can see how critical this backtest is right now to the underside of the red triangle. The daily chart shows all the chart patterns that have formed since the October high last year. If the price action starts trading up and into the blue triangle that will mean we have a bigger consolidation pattern forming which will still be a consolidation pattern just a bit bigger at this time. What I’ll be watching very close is how the GLD interacts with the bottom blue rail of the triangle. The price action broke below the bottom rail of the blue triangle early this week and had a strong rally, that so far, has taken the price back up to the underside of the bottom rail as the backtest. You can see the downtrend has been picture perfect so far with lower highs and lower lows all the way down. The 60 minute chart below shows the price action for the last six months or so for GLD. As you know, gold along with silver, broke down from their respective triangles this week which we have been keeping a close eye on. I was going to write about the Risk on Risk off trade this weekend but with the big move up in gold on Friday I thought we should look at gold instead.
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