A Note Re: Gold’s Potential Descending Wedge Bottom

One of the things that make me think gold is putting in a descending wedge bottom here is the ratio of the parts of the move up from the April 15 low.  The first part of the move went from 1338 to 1405. That’s 67 points (on the August gold futures contract).

The price retraced a bit, then the second part of the move went from 1340 to 1488 (same contract). That’s 148 points.

148 / 67 = 2.21.

If the ratio is much over 1.6, the wave is highly likely to be a leg of a triangle or wedge. Because the price has dropped to a new low, it would have to be a descending wedge.

Wedges are a must-play for me. Very high returns.

This will be a playable bottom (assuming the price breaks out the top of the wedge), but no way to tell if this is the final bottom for gold.

Price Action That Would Change the Odds at the 200 dma & Trend Line

A Triangle at a Potential Neckline Would Change the Odds at the 200 dma

A Triangle at a Potential Neckline Would Change the Odds at the 200 dma

You need triangles and/or wedges to reverse a significant move because these formations are the footprint of big money changing sides, and it takes big money changing sides to reverse a significant move.

Assuming the price on the E-mini/SPX makes it back to the potential neckline after having broken out of the bottom of the short-term ascending wedge, a triangle moving sideways there would improve the odds of the price breaking through the 200 dma and trend line from the October 2011 low.

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