Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199

 

Search Gold Prices
Gold Price
[Most Recent Quotes from www.kitco.com]
Our RSS Feed

Gold Updates by Mail

Enter your email address:

Follow Us on Twitter
« Desperate Dollar Heading to the Basement | Main | Russia and China to Sign Mega Deals »
Wednesday
Oct142009

Golds Inverse Head and Shoulders Formation

gold chart 15 oct 09.JPG


A number of writers have referred to this formation on the web so we assumed that it was well and truly covered and understood, however, we have a had a number of questions regarding heads, shoulders, neck lines and reversals etc, from our readership so we will give it our 'take' on it for what its worth.

In a nutshell this chart formation consists of a peak which is the head and a left and right shoulder which are lower and usually similar in shape and size. Imagine that you are looking at silhouette of another person and you have got it. These patterns are rarely perfect so a little imagination is required when you are looking for any of these patterns.

When a normal head and shoulders formation presents itself you might want to draw an imaginary line across the chart representing the neck line. Now when the stock price breaks down below this neck line it is usually viewed as negative for the stock and therefore we would expect the stock to head south.

The same rational can be applied when the chart is reversed and this pattern is usually known as an inverse head and shoulders formation as the chart above of gold shows.

Now if we take a close look at the chart we can see that the neck line has been broken and gold has indeed set off in a northerly direction, so we could say that the theory is being demonstrated by golds movement.

Another thing to notice is that once through the $1000/oz level which has been a resistance level for some time, gold returned to test this level and was supported. So what was once the resistance is now the support level, but we digress.

A good source of data regarding charting is StockChart.com so if you have a few minutes to pass, then its well worth familiarizing yourself with this site, just click the link.

Hope this helps if you are new to charting and if you are experienced in this area then please feel free to add your two cents worth.



Have a good one.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector that is currently coming back to life, you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>