Commodities Technical Analysis: Gold Continues Bull Run as Silver and Brent Weaken
Gold Technical Analysis
Gold is in a long term bull run of which there is no proof that the end is in sight. The weakness of the Dollar on the FX spread betting markets has further strengthened the demand for gold as an alternative safe haven for investors.
Looking at the gold chart below we see the price took a temporary dip in February, but emerged from the Ichimoku Kinko Hyo cloud again on the 21st of February.
Since then it has broken through the support level provided by the blue Kijun-Sen line twice, only to proceed with its uptrend shortly afterwards.
Right now the gold price is above the red Tenkan-Sen line, but still below the blue Kijun-Sen. A cautious trader should therefore wait for the price to break through the blue Kijun-Sen before going long.
It would also be advisable to wait until the gold technical analysis also shows the red Tenkan-Sen breaking through the blue Kijun-Sen, indicating that the short term correction is over.
Silver Technical Analysis
The silver spread betting market is currently either moving into a bear market, or it is going through a major correction.
If we consider the silver technical analysis of the chart below we see that the price broke out of the Ichimoku Kinko Hyo cloud on the 8th of February 2011 and subsequently closed at a high of $48.475 on the 28th of April this year.
After that it started to decline. First it broke through the red Tenkan-Sen line and then through the blue Kijun Sen support line. After that nothing could stop the downward spiral and, on the 5th of May, it closed below the top line of the Ichimoku cloud.
Between the 6th and 10th of May there was a temporary attempt to resume the previous upswing. However, this faltered and on the 23rd of May it was trading below the Ichimoku Kinko Hyo cloud, a clear indication that the market might have moved into a bear phase.
The green Chinkou Span line is also below the price of 26 days ago, which further strengthens the perception of a bear market. The red Tenkan-Sen is also well below the blue Kijun-Sen, another confirmation that the bull run is over for now.
If the price should move below the level of $32.955 it briefly reached on the 17th of May, traders can start thinking of entering into short trades.
Brent Crude Oil Technical Analysis
Before the 5th of May 2011, Brent crude oil was in a clear bull run from a crude oil technical analysis point of view.
We then had two days of what looked like a minor correction, but on the 5th the price suddenly dropped from $121.03 to $109.66.
It attempted to regain some momentum afterwards, but the downward pressure was too much and it subsequently nosedived into the Ichimoku Kinko Hyo cloud.
At the moment the price is well below the cloud. The green Chinkou Span line is also below the price 26 periods ago and the red Tenkan-Sen is below the blue Kijou-Sen, another confirmation that the price has moved into a, possibly temporary, declining phase.
Strong believers in the effectiveness of the Ichimoku Kinko Hyo to indicate market trends should no doubt now go short of Brent crude oil. Itís early days, however, and if you are a cautious trader you should perhaps wait for more confirmation of a bear market.
This can be provided if the blue Kijun-Sen also drops below the Ichimoku cloud. At the moment it has turned horizontal, indicating some market uncertainty.
Good luck and happy trading
Shai Heffetz, InterTrader
(Original article written 26 May 2011).
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'Commodities Technical Analysis: Gold Continues Bull Run as Silver and Brent Weaken' edited by DB, updated 27-May-11
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