By Relmor Demitrius
SPDR Gold Shares (NYSE:GLD) and Spot Gold has been trading sideways for a few months now. After achieving new record highs and a period of prolonged consolidation over the $1000 dollar mark, the GLD has been setting up a nice floor for possibly another breakout coming soon. These breaks can be up or down on this pattern, but they usually break in the dominant trend, in this case, up. Let’s take a look at some points of interest.
As per my chart 1 below, the GLD is in a symmetrical triangle pattern that will resolve on the 20th of May. We have converging trendlines that demand a resolution on that day or before. The break should occur in the direction of the trend, which has been up, and is usually a break of significance, meaning not just a few dollars. I expect a break back into the higher channel, now between 115 and 125, at this time. A break on this consolidation is possible back into the extremely bullish top channel of 125 to 137 as well. I expect sideways until then, between 109 and 112 until this break occurs.
The 2nd chart is a look at the rounding top action versus sharp hits and retraces. You will notice that the rounding off pattern (attacking the resistance line more than just once, for instance) has resulted in better overall reactions to the price.
The third chart shows a similar pattern break in the past, with the underlying volume information. You can see the first pattern broke on high volume, and the same it true when the pattern broke down at the top as well. Notice the sharp hit off resistance and the subsequent harsh reversal. I see rounded tops here, consolidating into that wedge, and a breakout coming. I show expected direction on this chart as well.
Recognizing these patterns early can help you execute a nice trade, pick a nice entry position, or determine where your exit might be, at least for short to medium term. Keep in mind, a break down is in play as well, but as stated, the break is usually in the general trend. Low volume breaks are less reliable than high volume breaks. Low volume breaks are possibly head fakes in that direction, so make sure these breaks occur cleanly, and with volume before action.
Chart 1
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No position GLD/Gold Futures
