A series of higher highs has been forming in the gold futures since the market bottomed out near the $1,600 per ounce level. The duration of these higher highs has now established a well-defined uptrend on the short term charts, which bodes well for a possible continuation in the week ahead. Autochartist has detected a broadening Channel Up chart pattern, illustrated here on the 15-minute time interval, which sets out guidelines for trading the current trend.
Gold has now established a very large trading range between $1,550 per ounce and the all-time highs above $1,900 per ounce. Because this range is so large, it is possible that the market will move in a sideways fashion for a considerable amount of time, which will allow for numerous pattern set-ups on shorter time frames.
The Channel Up chart pattern currently playing out sets the short term range of about $40 per ounce, with the price seen moving gradually higher between the $1,630 and $1,670 levels. These support and resistance trend lines will either contain the move higher, or an eventual breach of the Channel Up will initiate a technical breakout and portend a major directional move from there.
The last swing into resistance on the chart near $1,650 per ounce set the pattern in motion for a shallow retracement to the bottom of the channel. As this retracement has so far been a narrow lateral drift, there appears to be diminishing selling pressure at this price level, A successful test of the trend line could set up a long entry point for an eventual run the top near $1,670 per ounce.
If the top of this channel is exceeded, it will confirm the technical strength of the market remains strong and imply the $1,600 per ounce swing low may have been the completion of the retracement from the highs. If so, the rising trend should accelerate with a move towards the $1,900 price level once again.
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