Sunday, July 14, 2013

An Update on Oil and Gold...

Last week on StockTwits I posted the top chart above. I have been following Gold rather closely as I am sure many of you have been too. So I figured I would throw out some observations. In the top chart above I mentioned how I was not sure if the bear market in Gold was completely over just yet. But that I thought the risk vs. reward was really starting to favor the bulls. I believe at the very least a retest of the  $1525 low area seems like a pretty high probability.

As for the downside I noted the nearing measured move target below and the matching percentage drop of the 2008 bear market, which has now been achieved, as potential signs of an oversold condition. The bottom chart above drills down a little closer, using the daily chart of the GLD (Gold Trust Etf). Here I have noted the short term roadblocks that are keeping this trend down.

The $127.60 area would match the size of the retracement rally of April of approximately 13.5 pts. The $129 level is the midpoint of the April drop from $143.43 to the current swing low at $114.68. Lastly and maybe most importantly, the $130.50 which would represent the open breakaway gap in June, a double bottom and swing low and most likely by that time 50ma resistance. I would venture to say that any continued strength above that zone would make $1525 and maybe more, a very realistic probability.

As for Oil, the top chart above shows weekly price action all the way back to 2009. We have had a trading range for the most part between $80-$100 but now find ourselves trading above $107. The bottom chart shows daily trading and what I perceive to be the current technical setup. We have had a significant box trading range of approximately 8 pts in length and a maximum range of 12.75 pts which is approximately the range from this years high to low. Adding these amounts to the breakout zone can give us a clue about potential upside targets/projections.

As you can see 8 pts added to the breakout zone gave us the $107.25 zone that provided us some resistance at least in the short term. A next measured move upside target would then come in around $112. Which would come by adding the 12.75 pt length to the $99.25 breakout zone. Also note from the top chart the swing high left behind in 2011 which comes in around $114. I believe any further strength above $107 would mean the $112-$114 level would be next. Continued strength even above that zone could have us going to $120 next. But we'll see how it all plays out.