Gold futures completed an impressive rally to reach a key target level during last week's trading. The week ahead will be important for determining whether this is a short term uptrend or the beginning of a major leg higher on the chart. After breaking out of the Falling Wedge chart pattern identified here on the Autochartist 60-minute time frame, the market moved easily towards the forecast price range.
The move as measured from the swing low inside the Falling Wedge level to Friday's close amounts to better than a $20 per ounce gain for gold without a retracement. The trade above $1,667 per ounce is very near the wing high price that began the formation of the wedge, making this a 100% retracement of the downside correction. This level represents the minimum projected price and leaves the pattern open for further gains as high as $1,678 per ounce on continued strength.
Traders will be watching for a possible pullback early in the week. If this occurs it may be viewed as a buying opportunity for momentum traders who missed the initial breakout, as well as a point to add to long positions for those who did catch it. The overall bias from this pattern breakout remains solidly bullish, with the resistance trend line of the wedge now acting as key support at the $1,655 per ounce level.
In the longer term, a continuation towards $1,678 will bring into play a longer term chart analysis which projects an eventual retest of the 2011 highs. With the Falling Wedge pattern achieving the completion stage, Autochartist will identify new patterns on multiple time frames to track the relative strength of the uptrend. Likewise, signs of weakness and key level failures on the way up will be identified as they develop. For further information on this and other Autochartist products, visit our website at www.autochartist.com