We’ve been following the rally on gold by monitoring daily and intraday support levels to check for holds on each pullback. Longer term investors can use the key support levels to place stops. A stop placed below support would be in the correct place since price extending below key levels would indicate that the rhythm of the uptrend had been violated. Shorter term and swing traders look for support to hold on each pullback with long side triggers coinciding with the start of a lift off these areas.

Here’s a look at the current daily charts for the August GC and ZG contracts:

Click on image to enlarge!

Click on image to enlarge!

I’ve drawn trendlines to show how the targets are calculated. As an initial upside target, we look for the 1.272 multiple of the prior high to low swing.

For shorter term traders or those looking for more precise entries, I maintain a 60 minute chart of the ZG contract too. Here’s a current chart with several entry triggers circled on the CCI (Commodity Channel Index) oscillator at the bottom of the chart:

Click on image to enlarge!

And as you can see, price is respecting intraday support as well. But a strong factor is showing up on a much higher timeframe; the monthly chart:

Click on image to enlarge!

I actually prepared this chart last year and sent it to my clients. It’s served as a touchstone since. This is a monthly GC chart created with continuous contract data. There are 2 important factors shown. Price is approaching target levels which are strong enough to show up on this timeframe. When a higher timeframe shows a swing which can be used to project a target, the target is stronger. In other words, the higher the timeframe, the stronger the target! These targets serve to “pull price” as attractors, and then serve as resistance once met.

Also, as we’re approaching these price target levels, there’s a strong timing factor pointing to at least a strong pullback for next month, if the pattern is going to continue. Next month represents the same amount of time in the 2006 to 2008 rally, projected forward from the 2008 low. You can see this timeline below price on the monthly chart above. Other Fibonacci timing factors are present as well. This means that if the pattern is going to continue, we can expect a strong reaction at the upcoming target zone!

For more from Mark including his “Chart of the Day”, visit MJBraun.net.