As highlighted in Friday’s trade ideas video, GLD (gold ETF) gapped down to put in an Island Reversal. An Island Reversal is a candlestick topping pattern that comes following an uptrend with a candlestick surrounded by a gap underneath on both sides. I have found Island Reversals & their cousin, the Island Cluster Reversal pattern (a cluster of candles separated by gaps) to be fairly reliable sell signals in the past. My expectation is for a pullback to at least the 119.60 area & possibly as low as the 117.70-116.90 support zone.
GLD daily Jan 4th close
Adding to the case for a pullback in gold is the fact that GLD kiss the top of this large symmetrical triangle pattern on the weekly chart, the top of which is defined by the downtrend line generated off the 2011 bull market high. My expectation is for a relatively minor pullback in gold before going on to break out above the weekly triangle pattern, followed by a rally up to the 130 area in GLD before the first major reaction. Depending on what I see this week, I may add GLD or GDX (or any of the related inverse, leveraged ETFs) as official short trades.
GLD weekly Jan 4th close