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Gold 1H chart 7:37AM EDT, 9/19/2012
Rally stalling: Gold is holding under 1780 since rallying sharpy last week after the Fed announced QE3. This rally was not a surprise rally as the market has been pricing in QE3 for quite some time now. The question is whether the market has exhausted the momentum of USD-weakness. The 1H gold chart shows a market that appears to be taking a breather. There is still a bullish bias outside of the intra-day look, but the 1H RSI did fall to 30, showing loss of near-term bullish momentum, and the 1778 area continued to provide resistance during the 9/19 European session.
Double top? As we bear up for the US session, the question of whether the gold market is forming a double top creeps in. If price can hold above 1765, I believe there is bullish bias within the current sideways consolidation. However, a fall below 1765 suggests further consolidation, and maybe even bearish correction to form a double top. The double top scenario is complete if the market falls below 1751. The previous consolidation zone earlier in September, is roughly in the 1747 to 1724 area. Maybe we’ll see some more consolidation there if the bearish correction does extend under 1751 for a double top.
It should be noted that a double top breakout projection (using the width of the pattern toward the breakout direction), targets 1725.
Silver 1H chart 7:40AM EDT 9/19/2012
Silver is in a very similar predicament in the 1H chart. There is resistance near 34.95, and support at 33.80. The central pivot is at 34.27. Holding above this holds a bullish bias while breaking below 34.25 is likely part of further consolidation, and possible bearish correction to form a double top.
The double top breakout projection targets 32.70-75 area, which is around the support area of the previous consolidation period, earlier in September.
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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