Wednesday, March 26, 2014

Looking for a new low in gold

By Erik Tatje

Gold (COMEX:GCJ14)

Gold has played host to a relatively large correction in the second half of March and price is now at an important level technically. Near term momentum in this precious metal is negative; however, the intermediate term directional bias remains positive until a lower low is established by price. This new low would have to close below the $1,308.0 pivot on the chart, which represents the previous lows on 2/19 and 2/20. Price came down to test this level yesterday and price action illustrated that there was buying power at this level as price rallied back up to the Fibonacci Confluence zone from $1,312.3 – $1,315.2. Both the $1,308.0 level as well as the previously mentioned Fibo c-zone should play a large role in price action going forward.

If price can gather itself at these levels and trade back above the Fibonacci confluence zone, than there is a good chance that the corrective pullback may be finding a bottom and gearing up for a new leg higher. With that being said, if price is unable to hold these levels and falls below the 1308.0 pivot, than the intermediate term bas will be negated and near term negative momentum could continue to weigh in on the Gold market.

April 13 Gold, 30-minute Bar Chart, eSignal

Yen (CME:JYM14)

The Yen has been relatively sideways with a slight positive tone as sell offs in this currency have had successive higher lows and recent rallies have topped out around the same level on the chart. 9886 appears to be a major level of resistance preventing the Yen from an extended move higher and could be a valid selling opportunity if the market is going to continue to digest in this range.

Currently, there is opportunity on both sides of this market and traders should use the RSI on both the 30-period chart, as well as shorter time frame charts (i.e. 10-minute charts) in oder to higherlight divergence signals at key technical levels that could provide an early indication of market strength/weakness. Given the sideways nature of the market, one of the higher probability trading strategies to implement would be to wait for the market to approach a previous level of S/R before entering the market to maximize ones risk/reward metrics. Local support could potentially be found at 9751 and 9730, making these good candidates for long entry signals. Resistance will likely come into the market around the 9813 – 9822 range, so those holding long positions could use this as a potential profit taking area, and those looking to establish a short position to play the range could consider selling at these levels. Until price can generate a well-defined directional trend, the diriection bias remains unclear.

June 14 Japanese Yen, 30-minute Bar Chart, eSignal

Sugar (NYBOT:SBK14)

Sugar looks to have reversed nicely off support around 1670 and, after closing near the highs of yesterday’s session, price has opened today looking strong. The 1667 – 1670 Fibonacci confluence zone will remain as significant support in this market, with near term resistance come at the 1736 – 1745 area on the chart. If price can break above this area, than a rally up to 1781 could be in the cards for the Sugar market. The faster 20 periods moving average has just crossed above the slower 50 period moving average, generating a near term buy signal in the Sugar market.

As a result of the pullback from the 3/6 highs, near term momentum will remain negative until price can trade above the previously mentioned highs around 1736. The intermediate term directional bias remains positive in the Sugar market as price was unable to make a lower low below the previously mentioned support pivot at 1670. Traders should continue to read price action around key technical areas for insight into the strength or weakness of this market and monitor multiple time frame charts for potential trading opportunities.

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