Predicting Gold’s Next Move – Descending Triangle Gives 8% Swing Target

By Christopher Diodato –

Since the start of September, gold has been floundering around in a well-defined trading range between about 1610-1750, not really deciding to trend in either direction since.  Since that time, however, the gold market has been consolidating into a price pattern that allows us to project intermediate-term targets.  The pattern I see is a descending triangle.

There are two targets on this chart.  The bull target would be activated once the price breaks above $168.50, corresponding to $1685 for the actual spot price of gold.  The bear target is activated once $161 is broken, and confirmed as a strong sell signal once $159.50 is broken.

Which direction do I see price breaking out?  Well, it’s looking bullish in the very short term.  First off, today’s price action represented a “bullish engulfing” candle pattern.  After these patterns occur, there is, at least, some follow through with a short term price rise.

Other momentum indicators show minor  divergences in price, which usually precede a price rise.  Still, that price rise might not be sufficient to trigger a breakout.  What I would like to see is an advance on high volume, such as the volumes seen in the August-September rally when gold rose over $250 in one month  Average daily volumes on both rallies and declines is current about half the Aug.-Sept. levels.  Once that buying interest comes back, it’s time to catch the gold bug again.

Happy trading!

~Chris Diodato

Christopher Diodato

About Christopher Diodato

I have been trading since my eighteenth birthday to pay for my college tuition. It was at first rocky, but now trading is my love, my work, and my passion. In addition to my experience in markets, I have passed all three exams to obtain the Chartered Market Technician (CMT) credential. I believe that I am the youngest to ever do so! I want to help out small investors to make some money on the side. There's a common notion out there that "big money" rules all. I disagree. With enough hard work and discipline, anyone can become the next Paul Tudor Jones!