As the regular readers of this blog know, I was very bullish on gold the entire last week and put my money where my mouth is. Well, gold did indeed make a big move up and broke to all time highs on good volume. Make no mistake dear readers, I still like gold here but at the same time, the charts are telling me that a short term pullback might be on the cards here. Watch out for the volume on any pullback as it will most probably be a good buying opportunity.
Well, here are my reasons for not chasing gold over here. Firstly, a shooting star was formed on Friday. For all of you who don't know, shooting star is a candlestick pattern that signals a reversal. More information on it can be found here. Secondly, I am not seeing a similar scale up move in either RSI or MACD. See for yourself and draw your conclusions with the chart below.
Thirdly, the dollar, which has had quite a move to the downside in the last couple of weeks, is beginning to show signs of a bottoming process beginning to take shape here. More details are noted on the chart below. Again, I know I am jumping the gun on the call here but as I was so buoyant in writing about gold last week, I see it as my responsibility to point out the warning signs I see beginning to develop here.
Lastly, you would think that with gold at all time highs, most of the gold miners would be having very bullish charts. Well, I have pulled up some charts of gold miners that I like here and it was harder work than I had imagined. If you are a momentum trader, you might think about just going with the trend here but if you are a swing trader, I would suggest waiting for a pullback here. I have commented on the charts itself.
Well, there you have it dear readers. I am still bullish on gold but I think that it has got a little ahead of itself here and fancy the chances of a pullback here. Let me know what you think!
I will be back tomorrow with some more picks. Enjoy the weekend!