Previous Analysis
I have been looking at the price of both gold and the Dow Jones index in recent weeks because they have both been trading close to major resistance levels, and are therefore potentially worth shorting.
Since I wrote these two blog posts, nothing much as changed, particularly in the case of gold, but the Dow Jones has continued to move higher, and is now very close to the major resistance levels that I highlighted previously.
So I thought it would be a good idea to take another look at these two markets and make a prediction as to where they might be headed.
Please note that these are only my own personal opinions and do not in any way represent financial or trading advice of any kind.
Gold
I mentioned before that $1300 is acting as a major resistance level at the moment, and that still seems to be the case today:
At that time it was trading at $1283, but as you can see from the chart above, the price has slowly edged higher towards the $1300 level since then.
Nevertheless, it has once again stalled in the $1290s as the general stock markets have continued to rise, and as you can see from the chart above, the price has been trading in an ever decreasing triangle.
Therefore I personally think that it is only a matter of time before we see a breakout, and the likelihood is that it will be a downward one because of the continual round number resistance at $1300 and the tight price action.
So it wouldn’t be at all surprising if the price were to move back to around $1250-$1260, towards the 100 and 200-day moving averages, but if the price was to go back to $1300, it may also be worth opening a short here because I think this would be a fairly high probability set-up as well.
Dow Jones
As mentioned earlier, the Dow Jones has continued to recover from its December lows, and this isn’t really that surprising.
I said in a previous post that the price could easily continue moving higher and test its long-term moving averages, which at that time stood at 24,507 (EMA (100)) and 24,741 (EMA (200)), and at the time of writing, the price is now trading at 24,406 pre-market opening.
Indeed it has just touched the EMA (100) yesterday and today, having risen sharply from a low of 21,454, so it is now looking seriously overbought and could now be ready to turn lower now that it has reached two major resistance levels (the EMA (200) is just 280 points higher).
As always, the market never gives you a clear signal that a top or a bottom has been reached, but with the price trading close to two key moving averages, I think it could be a good opportunity to open a short position if we get a pin bar on the daily chart or one of the lower time frames, for example, because this would also be a high probability set-up.
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