Beware Possible Strong Move To The Downside For Gold
David Tablish | Nov 10, 2019 12:18AM ET
A line chart can give you a different perspective vs a bar chart which is why I like to use them both to help uncover a potential pattern. Line charts can oftentimes give you a quicker heads-up when a stock is breaking out.
Below is a weekly line chart for the SPDR® Gold Shares ETF (NYSE:GLD) which shows why I’m so concerned about gold and the PM complex right now. This weekly line chart shows a triple top with the breakout in progress. My biggest concern is that we could see some reverse symmetry to the downside as shown by the blue arrows. Many times, how a stock goes up is how it may come down over that same area—especially when the move was strong.
Note the tops at the 2016 high at reversal point #1 and the 2018 top at reversal point #3 in the 2016 triangle. After the initial breakout from the top in 2016 the price action backtested the top trendline, which produced the right shoulder of a bigger H&S top and then came the strong impulse move down. Some of you may remember the 2018 top when GLD was trying to break out to a new high but couldn't muster up enough energy to do so. I said then, if the bulls were in charge that it was time for them to step up to the plate; but after four hits of the top rail the bears finally won the battle with another strong impulse move to the downside.
At a bare minimum we currently have a reversal pattern in place, triple top, that is reversing the last impulse move up. There is not a lot of support to slow down a move lower which is why we could possibly see a strong move to the downside, reverse symmetry.
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