Gold: Ominous Chart Formations
October 7th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
As you know, I noticed a breakdown in the internals of the recent bullish gold move which resulted in some pretty wild volatility in the market.
Once another weekly candle was in, I thought I’d take another look at how we were doing.
In Summary: Exercise extreme caution when considering long positions in the near term. There is a possibility of a substantial decline from current levels.
The weekly chart just formed a hangman. I’m not much of a Japanese candlestick freak, but I have a basic knowledge of them and that looks like a bearish hangman with long shadow to me. Weekly stochastics are in extreme overbought territory (up in the 90s). Remember what I said about taking extreme band entries in the direction of the trend… Very risky. And this is the weekly interval. (Although, I bought a couple of grams the other day—anyway—during a dip.) In addition, weekly RSI is 74.85. This is also extremely overbought, and the RSI slope just turned negative for the first time in several weeks.
Hangman and extreme indicators on weekly chart
“Wow, that doesn’t sound too hot for the long side of things,” you might be thinking.
But wait, there’s more.
The daily chart appears to be describing a Bump and Run Reversal or Bump and Run Formation (BARF) as Thomas Bulkowski originally called it. Read about the Bump and Run Reversal and then look at the daily interval gold chart below.
Possible Bump and Run Reversal on daily chart
To top it all off, daily MACD has crossed down.
