Gold Respects Resistance - Sell Off Coming?
Gold has been technically and fundamentally supported for several years. The technical patterns are beginning to break down which could mean the shiny metal has the potential to sell off from current levels.
A break below 1532 would confirm a new downtrend and offer a trader an entry to sell.
Last week, Gold broke below the 40 week moving average for the first time since January 2009. This technical indicator is watched by many large institutions to give clues about trend direction.
Additionally, Gold broke below the 200 Day Simple Moving Average last week which is another technically bearish sign. Earlier today, gold pierced the 200 SMA from the bottom side and immediately turned lower. This respect for these important moving averages indicates the appetite for owning gold at these prices is waning.
Therefore, we’ll look for technical reasons to sell gold. Since the low of late September 2011 is 1532, place an entry to sell 1 point below at 1531. Prices trading to these levels will indicate that prices are trading at levels not seen in 5 months which also indicates technical weakness. Place a stop just above a recent swing high on a break below 1531.