The price of Gold have witnessed a strong rally from the lows of Rs 21614 levels as on 01st July,2011 to register a high of Rs 23320 levels as on 19th July, 2011.
Since then the price of Gold has been consolidating within broad ranges of Rs 23275 to Rs 22930 levels. But, as outlined in the chart above the price pattern of Gold within this consolidation range has formed a bearish head and shoulder pattern on the intraday charts.
A head & shoulder price pattern is an extremely bearish technical setup and will have a negative effect for the future price movements of an index/stock or a commodity price.
Some of the other bearish signals that support the bearish argument are the sell signal given by the MACD indicator and the sell off witnessed during the previous session was also on the back of strong surge in volumes which is a clear indication that the prices were under supply pressure.
We recommend traders to sell 50% at current levels and again on rallies to Rs 22975--Rs 23050 levels with a stop loss placed above Rs 23109 levels for downside targets of Rs 22775 / Rs 22670 levels.
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