Mini Gold Plunge Setting Up

Gold is Working on a Top Before a Plunge to the Bottom of the Gray Megaphone

Gold is Working on a Top Before a Plunge to the Bottom of the Gray Megaphone

Gold set up a legal upwards breakout from the pink megaphone inside the red rising megaphone.  The red rising megaphone is a topping pattern across VWAP of the big light blue megaphone that’s been forming since October 2o14.

That meant gold was legal to go stampeding up to a retest of the July 2016 high.  But instead, gold has gotten bogged down forming a topping pattern at the pink megaphone top.

That means gold is likely to reenter the pink megaphone for a plunge to its bottom near the red rising megaphone bottom.

Gold could be working on a topping pattern before a plunge all the way to the light blue megaphone bottom in the 700s (green scenario).  Or, more likely, it could continue to bog down in new megaphones across the 1233-1250 area as it completes a triangle (navy blue) that could break out in either direction (purple scenario).

You have to be careful about shorting here until gold actually breaks down from a complete topping pattern back into the pink megaphone.  Gold can take a long time to complete tops, even small ones.

Potential Gold Head and Shoulders

Potential Gold Head and Shoulders at the Silver Megaphone VWAP

Potential Gold Head and Shoulders at the Silver Megaphone VWAP

Gold is putting in a potential head and shoulders top at the silver megaphone VWAP (red neckline). If the H&S puts in a simple right shoulder and breaks out (green scenario), the first target is the blue megaphone bottom.

Gold could also put in a megaphone right shoulder and squeaker new high on a larger H&S top (purple scenario) or break out upwards from the H&S for a melt-up to the silver megaphone top.

Here’s what it would look like on the daily:

Gold Could Be Setting Up a Crash to the 700s (Blue Scenario) but is More Likely to Complete a Large Triangle Here (Orange or Pink Scenario)

Gold Could Be Setting Up a Fast Crash to the 700s (Blue Scenario) but is More Likely to Complete a Large Triangle Here (Orange or Pink Scenario)

The green and purple scenarios could set up a fast crash into the 700s. That is not the most likely scenario, but if you see it, this kind of crash would be a great set-up to get long.

More likely gold will continue to form a triangle across 1200 (orange or pink scenarios). The triangle could break out in either direction into a big move.

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.