Tuesday, June 24, 2008

Elliott Wave Count on Gold - II

Gold broke down just from the level which could have triggered alert signal in the structure of the wave count. The most important take from this market movement was to see the wave personality during the formation of this wave. Nearly everybody I talked to or read were bullish about gold. Which confirms that 2nd wave was in progress of the 'C' wave of the corrective zig-zag pattern.

The market has given up most of its last week gains in the first trading day of the week. This week the US Federal Reserve will come up with its rate decision. I feel there would be little to take away from this event unless Fed really comes out hawkish and say or even hint that they would raise rates sooner than September. EUR/USD which has a strong directional correlation with Gold also looks set to decline in the coming few sessions. Daily chart set up of EUR/USD looks weak but the weekly pattern has still not broken down. Euro will get into a medium term bearish zone as and when it trades below 1.5280.

Looking at the elliott wave structure of Gold I see a strong down move to $827 on a daily close below $870. The risk level still remains at $910 on the spot markets. It was hugely profitable to short the market in the latter part of last week as gold neared $908 in the spot market. NYMEX GC near month didn't break its previous immediate high of $912.5, so as an avid elliott wave practitioner it was important to go short. The current structure looks like this.

The zig zag pattern that is taking shape in gold can extend to $750. Still early days to take a call on that. If gold trades below $850, then $750 would make me very interested. Another important pattern that can be seen on the charts is a running triangle pattern which came up in discussion with one of my friends. Here it is.

If we go by the triangle and wait for the breakdown below $860, Gold targets $807 and then $750 over a 3 months period.

On the Zig-Zag pattern Gold targets a minimum of $827 on a close below $870 which would become highly probable as and when gold trades below $860 even for an hour or so. Again its important to keep an eye on the risk level which stands at $910. i will come up with other risk level as and when market breaks down.

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