David Tablish | Feb 11, 2014 12:59AM ET
In this Weekend Report we’re going to look at some short term charts for the precious stock indexes and try to decipher if this congestion zone they’ve been trading in for the last two weeks or so is a consolidation pattern that will allow the price action to rally up to the next area of resistance or is this two week chopping action actually a topping pattern and the precious metals stocks are in for another rough go of it. Man that was a long sentence. The sooner we can figure out what has been building out over the last several weeks the sooner we can take advantage of the situation.
Many times a line chart can give you a quicker entry point vs a bar chart. As we’re looking at the short term, two weeks or so, the first set of charts I want to show you is a 30 minute line chart. A line chart can take out a lot of the nose, such as a spike high or low, that can change the looks of a chart pattern quite a bit. It just uses the closing price for whatever time period you are looking at, in this case it will be the 30 minute charts.
As you know in the last hour of trading on Friday I started to build a position in the PM stocks based on what I was seeing on the line charts. I was waiting for a decent break and finally got it toward the end of the day. The breakout is small yet but there was also a backtest to the top rail if you look real close.
Lets start with the XAU that shows us a four point bullish falling wedge with the really small breakout and backtest. Keep in mind the XAU is not the leader right now so this little breakout and backtest is important IMHO. Also when you look at these 30 minute charts notice the area at the bottom of the charts that I’ve labeled as “Nice Base.” If you, recall when the area under the black dashed horizontal rail was being put in, we were seeing small reversal patterns such as a 5 point bullish falling wedges and some rectangles. They will be easier to see on a bar chart. The point is we do have a base in place which has broken out to the topside. The price action has rallied up to form a consolidation pattern and that consolidation pattern has broken out to the upside. So far this is an uptrend. The real confirmation will be when the price action trades above the previous little high in this consolidation pattern.
This should get everyone up to speed on what I’m seeing in the precious metals complex right now. We’ll take it one step at a time. As long as they’re moving in the right direction we’ll go along for the ride.
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