Gold has developed a clear downward trend compared to the strong resistance level close to $ 1,364. Many gold traders were expecting a break above the long-term critical resistance level of nearly $ 1,364 and a move towards $ 1,550. However, the uptrend was disordered in its behavior, so that conservative traders were rewarded.
The long-term GMMA provides insight into how investors think. When the long-term GMMA is compressed, this suggests low investor support. Strong investor support for a trend is manifested by a broad and regular separation of the GMMA in the long run. Long-term GMMA averages have been reduced and are falling. This shows the weakness of the trend and the development of a new downtrend. This is the first feature of the new downtrend.
The confirmation of the change in trend comes from the way the price is grouped around the lower limits of the GMMA in the long run. This shows that the long-term GMMA acts as a characteristic of resistance.
The short-term group of GMMA averages indicates how traders think. They compressed, turned down and grow. The growing separation shows a higher level of trader commitment to the short-side trades. The GMMA in the short term moves below the GMMA in the long run, which is usually associated with a lasting change in trend. This is the second characteristic of the change of trend
. The third characteristic that confirms the change of trend is the sustained movement below the ascending trend line. This trend line is difficult to position exactly. It starts at the lows of December 2016, but the second anchor point of the uptrend line only appears in January 2017. This means that the position of the trend line is not well tested and that, in turn, this means that the uptrend is not well defined. However, the price has clearly fallen below the trend line.
There are two bullish targets for gold. The first is based on the previous consolidation area near $ 1,250. This is a level where, historically, the price has paused and moved laterally. This is not a solid level of support.
A support level is one where the price has fallen to that level, then rebounded and developed a new uptrend. The historical support level is close to $ 1,210. This suggests that the downtrend could stop at around $ 1,250, but traders will be willing to lower the price to support nearly $ 1,210.
Traders continue to exchange retirement behavior. We use the ANTSSYS trading method for this.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com . He is a regular guest on CNBC Asia Squawk Box. He is a lecturer at trade conferences in China, Asia, Australia and Europe. He is a special consultant for AxiCorp.
For more information on CNBC contributors, follow