Dramatic volatility remains the hallmark of the Gold futures market, with the start of 2011 seeing bouts of heavy profit taking from the historic highs above $1,400 per ounce. Last week's sharp sell-off reached a previously targeted supported area near $1,350 per ounce in rapid fashion, before the market managed to bounce and recover slightly to finish the week.
This short term price action may signal a swing low has been established, with range-bound trading to define the week ahead for the precious metals. Despite the volatile swings in trading, the chart has clearly established a technically strong Channel Down chart pattern on the 15-minute time frame, identified here by Autochartist with a projected price target to the upside.
In the long term, there may yet be another leg down for Gold, as the series of patterns developed over the last several pushes to new highs have largely been short-term reversal patterns that were moving against the trend lower from the peak. The commensurate sell-offs have largely been viewed as continuation patterns. This combination near the highs of a market are often referred to as a distribution top, which is a series of buying and selling surges that gradual unfold with increasingly lower lows and lower highs, until a major support level is retested. In this case, the last major long-term support level in Gold rests near $1,250 per ounce, which could ultimately be the next major pivot level for this market in the weeks ahead..
Meanwhile, the short-term provides a more clear direction towards at least a partial recovery of last week's losses. The Channel Down chart pattern has a very well organized appearance in terms of Uniformity and Clarity, helping give the overall Quality reading for the formation a 7-bar reading on the Autochartist platform.
Friday's price recovery was sufficient to push the price of gold through the top side of the channel, which triggered a buy signal on very strong intra-day momentum. This lends weight to the market's potential to reach the projected profit target.
If the pattern plays out to optimal results, the forecast price target from the breakout shows a minimum recovery to reach the $1,383 per ounce level, with an upper end of the targeted range seen near $1,392. This would take the market back to what is now becoming a major resistance level of $1,400 per ounce,
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