Thursday, January 20, 2011

Abigail Doolittle: Take Caution Around Gold

I really like the technical work I see being done by Abigail Doolittle at Peak Theories. As I have pointed out before, there is much of technical analysis that is voodoo like, but there is some analysis that can be traced back to looking at and trying to understand human action around certain trading patterns. Dooloittle tends to focus on these trading patterns. She has been right on target in highlighting the recent dip in gold.

Here's her latest analysis, where she remains short-term bearish and long-term bullish on gold. Specifically she believes that

  - With gold below $1,353 per ounce, it appears to have begun a nascent trend of lower highs and lower lows or the topping process that she has been writing about.

- This suggests that gold may continue to move down and especially with gold slightly below its 100 DMA of about $1,347 per ounce.

- In turn, this may suggest that gold will fulfill its small Bear Flag with a target of about $1,330 per ounce and even the Diamond Top pattern with a target of about $1,284 per ounce.

- If gold hits that target of $1,284 per ounce, there is a good chance gold will retrace the entire ascent leading to the Diamond Top or decline to about $1,155 per ounce.

- Such a decline would be consistent with a pull down to gold’s long-term trendline which, ironically, will strengthen the long-term uptrend.

- Caution is advised around gold in the near- to intermediate-term due to this potential near- to intermediate-term reversal.

- In the long-term, however, gold’s primary and bullish uptrend appears to remain very much in place.
The value of analysis like this is that it helps us to understand short-term moves against the trend that are nothing more than complex versions of profit taking. Here's Abigail

1 comment:

  1. Watching the price action says much more than all the blather.
    When it corrects, it will be time enough to buy..
    Admittedly, the wait has been painful..