Some Big Swings Setting Up in Gold

Gold is Likely Forming a Triangle (Orange), which Means Some Big Swings are Setting Up to Retest its Top and Bottom

Gold is Likely Forming a Triangle (Orange), which Means Some Big Swings are Setting Up to Retest its Top and Bottom

Gold is now megaphoning across 1200, which is VWAP of the big megaphone that’s been forming since late September 2014. That makes gold a favorite to complete a triangle (orange) across 1200. The triangle could break out in either direction.

If gold is forming that triangle, it will soon be putting in some big swings to set up the formation’s top and bottom.  Those will be swings to the blue and red megaphone tops and bottoms.

If gold can break out upwards through both 1230 and 1250, it will be going for a retest of the July 2016 high.  If instead gold is turned back at 1250, it will likely be going for a retest of the December 2016 low before the retest of the July 2016 high and subsequent retest of the November 2015 low.

Be aware that triangles tend to be comprised of a series of megaphones inside megaphones, and they can get very messy in the middle.  The moves coming up may not be as clean as drawn.

Gold Price Channel Update

Gold has Continued Sliding Down its New Red Price Channel and is Now at the Moment of Truth

Gold has Continued Sliding Down its New Red Price Channel and is Now at the Moment of Truth

Gold has continued sliding down the new price channel (red) that confirmed yesterday and is now near the channel bottom where it either breaks out into a melt-down set-up or starts a bottom.

You know that gold is starting a bottom if it reaches the channel top again from here.

Gold Megaphone on Weekly Chart

Gold Megaphone on Weekly Chart

The channel has taken gold back to the VWAP of the megaphone (blue) it began forming in fall of 2014.  That VWAP is at roughly 1200.

That means a breakout from the price channel into a melt-down set-up would be a breakdown through that long-term VWAP with a target of the blue megaphone bottom.

If instead gold starts a bottom here, it is settling in to form a triangle across 1200 (purple scenario) that could break out in either direction.

An upwards breakout would mean a breakout from an inverse head and shoulders bottom with a triangle right shoulder with a target of a new all-time high.

A downwards breakout would target the blue megaphone bottom.

Gold is in New Price Channel’s Critical Decision Wave

Gold has Confirmed the Red Price Channel and is In Its Critical Decision Wave for Starting a Bottom vs Breaking Out Into a Meltdown

Gold has Confirmed the Red Price Channel and is In Its Critical Decision Wave for Starting a Bottom vs Breaking Out Into a Meltdown

Gold has confirmed a price channel (red) for its breakout from the navy blue rising wedge.  The price channel is in its critical decision wave for starting a bottom (green scenario) vs breaking out into a meltdown (purple scenario).

A meltdown would likely stop around 1150-1175, but it could go all the way into the 700s so it’s the kind of set-up you want to play if it occurs.

Price channel melt-down set-ups can also morph into falling megaphones or falling wedges twining along the channel bottom, but these tend to form clear bottoms so it’s easy to get out with at least a small profit when they occur.

The green scenario would likely set up a long period of gold moving sideways to form a triangle across roughly 1200.

 

Gold has Confirmed a Rising Wedge to 1250 Target

Gold has Confirmed a Rising Wedge (Blue) to its 1250 Retrace Target

Gold has Confirmed a Rising Wedge (Blue) to its 1250 Retrace Target

Gold needed a retrace to its purple megaphone VWAP at 1250, and it has just confirmed a rising wedge (blue on chart) as it reaches 1250.

Gold Rising Wedge to the Purple Megaphone VWAP Raises the Odds of the Purple Scenario

Gold’s Rising Wedge to the Purple Megaphone VWAP Raises the Odds of the Purple Scenario

While gold could break out upwards from the rising wedge (pink scenario), it’s most likely to break out downwards to either start a series of megaphones-inside-megaphones across 1200 (green scenario) or start a plunge to the bottom of the big red megaphone on the chart (purple scenario).

The green scenario would ultimately form a triangle that could break out in either direction–up for a breakout from an inverse head and shoulders with a triangle right shoulder, or down for a trip to the red megaphone bottom.

Gold could also use the green scenario to stay near 1200 for years.  In that case, it would break out upwards from the green triangle but only to the top of the red megaphone, where it would reverse to complete a large megaphone right shoulder on gold’s potential inverse H&S.

GDXJ Inverse H&S

GDXJ Inverse H&S (Red Neckline)

GDXJ Inverse H&S (Red Neckline)

GDXJ has an inverse H&S bottom on its long-term charts (red neckline).  It’s also formed a megaphone off the bottom (blue) and just put in the retrace to VWAP that makes the megaphone legal for an upwards breakout.

That means GDXJ could head straight up from here for a breakout from the inverse H&S, with a target of roughly 100 (green scenario).

The purple scenario represents a triangle right shoulder on GDXJ’s inverse H&S, with follow-through on a larger inverse H&S set-up.

The orange scenario represents a breakdown through the blue megaphone VWAP for a new low near zero.  The odds of this are extremely small.

The pink scenario represents a false breakout through the red inverse H&S neckline to put a megaphone right shoulder on the formation.  If you see GDXJ reenter the inverse H&S after a small breakout, get ready to buy the dip just below 25.

The longer GDXJ spends down here forming a right shoulder, the more likely it is to break out quickly through 100 when it finally heads up.

Gold is Approaching its 1250 Critical Decision Point

Gold is Approaching its Critical Decision Point at the Purple Megaphone VWAP

Gold is Approaching its Critical Decision Point at the Purple Megaphone VWAP

Gold is approaching its purple megaphone VWAP (volume-weighted average price) and critical decision point at 1250.

Gold had a mandatory retrace requirement to 1250 before it could legally break out downwards from the purple megaphone and through the orange megaphone VWAP at roughly 1140 for a trip to the orange megaphone bottom in the 700s.  So gold could reverse at 1250 for that plunge.

Gold is Approaching 1250 within the Red Rising Megaphone on the 60-Minute Chart

Gold is Approaching 1250 within the Red Rising Megaphone on the 60-Minute Chart

Gold is approaching 1250 within the red rising megaphone on the 60-minute chart. This rising megaphone would typically complete with a head and shoulders top inside the formation that breaks out at the same time as the formation for a plunge to its bottom at 1200.

From 1200, gold could go blasting off past the July 2016 high for a breakout from a big inverse head and shoulders on the weekly charts.  That’s unlikely with a chart like this.

More likely, gold will either enter into the green megaphone-in-megaphone scenario on the top chart to complete a triangle (red on top chart) that could break out in either direction, or gold will complete the navy blue megaphone top on the 60-minute chart and break out downwards into the 700s.

The green triangle scenario is the strong favorite, but remember that Neely has a big correction set-up on his SPX charts for February or March that could mean an atypical move for gold too.

Gold Update

Gold Appears to Be Forming an Interior Megaphone Across VWAP of its Blue Megaphone, Raising the Odds a Triangle is Forming

Gold Appears to Be Forming an Interior Megaphone Across VWAP of its Blue Megaphone

Gold appears to be forming an interior megaphone across VWAP of its blue megaphone.

While this could be a bottoming formation before an upwards breaking from the blue megaphone, or a quick consolidation before a plunge to the blue megaphone bottom, it’s more likely that gold is forming a triangle along the bottom of its red rising megaphone.

That triangle could break out in either direction. A downwards breakout would take gold to the blue megaphone bottom and its long-term retrace target of the bottom of the red rising megaphone.

An upwards breakout would mean the red rising megaphone is extending.

The green scenario is a strong favorite. A meltdown to the blue megaphone bottom would be a strong set-up to buy gold for long-term.