GOLD Breaks out from its Trading Range

Update (4:39 Pm , 19/02/2009) : Gold has been moving up and up and made news high with strong volumes , Any dip can be used for fresh buying .

GOLD has been moving into a trading range from Apr 2008 last year . It was moving in range 1140 - 1380 for almost an year . It touched 1380 levels trice . But recently It has broke out from that trading range and currently trading around 1480 levels .

Below is a 2 yrs , weekly chart of GOLD . You can see some indicators which also support the break out like OBV and MACD , Both of them are rising which tells that move is strong . Volumes in Feb are better than Nov , Dec and Jan which again supports the move .


Click on the chart to enlarge .
What are the other factors supporting the GOLD price to upside ?

The biggest thing is that it has moved out of its trading range , The other factor can be that Equity markets are still uncertain in near future (4-5 months) . Bad budget along with bad global clues and coming Elections will also contribute to the uncertainty in Equity markets . GOLD having safe reputation and inverse correlation with Equity will be a small plus point .

What should investors do ?

Anyone who wants to invest in GOLD can invest in GOLD ETF's . Wait for a small dip in GOLD and once it starts rising buy it at that point .A small down move is expected , after which it should again start its up move .

What is the Target price and Stop Loss for GOLD ?

Target : The Target for GOLD can be the Support point + The Height of the Range = 1380 + 240 = 1620 .

Stop Loss : SL should be 10-15 points down from the Support levels .

What if GOLD does not move up ?

What I have shown is simple technical analysis . TA is nothing but analysing something and making an opinion with high probabilities .So it can fail . But there good chances that it will not . If it does , then we have to accept that it was a failed breakout . Analysis was correct but this time markets didn't want us to make some profits ;) . It happens !! . The only thing you have to remember is that the reward from this trade can be much more compared to the amount you are risking .

Understand , we are making a good trade . It can be loosing one . Making a non-profitable trade is perfectly fine in long run , if it was properly studied .

Some Lessons and Learnings

What Does Breakout Mean ?

Break out means coming out of the trading Range on the upside . When it breaks from downside , its called Break down , In any case , further movement should be expected . Read it here

What are OBV and MACD ?

They are indicators which gives some indications and confirmations about the movement . Once breakout happens , we confirm the movement with Indicators . Read more about OBV and MACD on your own , thanks :)


Disclaimer : I hold 10 units of GOLD ETF's bought around 1220 levels from last 9-10 months .