Gold from the above chart is
forming a Bull Flag Pattern Formation where it has rallied from the lower level
of 680$ and tested the higher level of 1920 and on monthly closing basis was
seen at 1825$. After the sharp rise from the lower level of 680 to 1825 Gold
went in the consolidation phase where the consolidation was seen from August
2011 till now and is just near the lower support of 1500$ and if this support
holds reversal is expected from current price and will move to test higher
resistance level of 1790$ and crossover above 1790$ will give a Bull Flag
pattern Breakout.
Calculating the Target from the
Breakout which is also explained in the Chart where the market has rose from
the lower level of 680 testing the higher level of 1825 making a Pole length of
1145$. Consolidation phase was seen between 1800$ to 1520$ which comes to 280
points. If we look at a reversal in price from here can test immediate resistance
level of 1790$ and crossover above 1690 on weekly closing will further bring to
higher target if 2935; which is the Difference of the Pole (1145) from the
breakout point of 1790$.
1.
Sharp Move: To be considered
a continuation pattern, there should be evidence of a prior trend. Flags and
pennants require evidence of a sharp advance or decline on heavy volume. These
moves usually occur on heavy volume and can contain gaps. This move usually represents the
first leg of a significant advance or decline and the flag/pennant is merely a
pause.
2.
Flagpole: The flagpole is
the distance from the first resistance or support break to the high or low of the
flag/pennant. The sharp advance (or decline) that forms the flagpole should
break a trend line or resistance/support level. A line extending up from this
break to the high of the flag/pennant forms the flagpole.
3.
Flag: A flag is a
small rectangle pattern that slopes against the previous trend. If the
previous move was up, then the flag would slope down. If the move was down,
then the flag would slope up. Because flags are usually too short in duration
to actually have reaction highs and lows,
the price action just needs to be contained within two parallel trend lines.
4.
Break: For a bullish
flag or pennant, a break above resistance signals that the previous advance has
resumed. For a bearish flag or pennant, a break below support signals that the
previous decline has resumed.
5.
Targets: The length of
the flagpole can be applied to the resistance break or support break of the
flag/pennant to estimate the advance or decline.
