Gold
Chart courtesy of Tradingview.com
As seen in the above 4-hour chart, Gold has finished shaping a short term reversal pattern we've seen before, called a Head And Shoulders pattern. This pattern was confirmed on the RSI where the model is even more bearish as consequent lower highs were shaped.
The vertical neckline, highlighted in black, has been broken today below $1197 and this is a good sell signal. The target is the distance from the top of the head to the neckline, subtracted below the neckline. So the market aims for $1159 (highlighted in the red dashed horizontal line), which is $35 down from the current price at $1194.
Risk is above the neckline beyond $1200, which is >$6 of potential loss. The risk/reward ratio is almost 1:6.
Watch closely for the next support located at $1177 where a March 31st low and March 19th high were recorded. Once the market fails, you should be nimble to square shorts with gains booked.
If the bears fail and the price manages to close above $1200, the first level of resistance is located at the top of the head at $1224. The next levels can be found at $1252 (January 29th low) and $1307 (year high).
Silver
Chart courtesy of Tradingview.com
Silver couldn't lift its head up after a large reversal Double Top pattern (highlighted in two red semicircles) emerged at the $17.30-17.40 level. The bears were successful in breaking below the pattern's neckline at $16.47 (highlighted in blue) and the price has sunk down to a local low at $16.12, the downside of the trend was shaped.
Right after that, the market pulled back to the broken neckline and tested it twice, but failed. The price then chose the path of least resistance and quietly landed in the local reaction low area at $16.15.
As the upside was already tested, there are two possible downward scenarios that can be played. The first downside target is located at the bottom of the current short term downtrend at $15.71, which is down 45₵ from the current level. And if we take a risk to the $16.49 level beyond the neckline, then it could cost us >34₵. The risk/reward ratio is not so good, but still positive.
Another downward target is at $15.44, where the start of the previous short term uptrend is located and then was reversed by the Double Top. The distance to this target is 71₵ and if we compare it to the risk of 34₵ which was referred to above, then the risk/reward ratio is more than 1:2.
Above the neckline, the price could go to the Double Top's high at $17.40.
Limit your risks with stop loss orders.
Intelligent trades!
Aibek Burabayev
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
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