Gold Chart of The Week - Weekly Gold Report February 11th through February 15th

Each week Long Leaf Trading
will be providing us a chart of the week as analyzed by a member of
their team. We hope that you enjoy and learn from this new feature……

We begin the week with the board in a sea of red as Currencies and
Commodities continue to deal with last weeks ECB meeting. While the
initial  Interest Rate Decision to leave rates unchanged had little
effect on any major market, the language used by Mario Draghi after the
fact resulted in decent profit taking in the Euro Futures. In short, he
noted the three month rally in the Euro and stated that it could prompt
him to revise the inflation projection for next month.

While no major support or resistance levels were violated right away,
the drop in the Euro did lead to adjustments in quite a few markets
ahead of this weeks lighter liquidity trading. With the Chinese markets
closed in recognition of the Lunar New Year, we expect trading volumes
to be thin. And without any major announcements until the upcoming G20
Summit at the end of the week, the plan will be to remain patient and
look for any violations of key levels on the charts to trade.

The April Gold has already fallen almost $20 an ounce as we near the
open of the pit traded session but seems to have targeted the same
support trendline that has been used four times since the Summer low
(arrow #1). It should come as no surprise that the early selloff would
run into a snag around this low as there were surely resting buy orders
waiting to catch the down move at a low price. If this support level is
violated, there is another standout price for support that has my
attention, and that is $1625 (Arrow #2). There are a few reasons that
this price will be in focus.

The first reason is because a drop to this
level will mean that Gold Futures had successfully filled all gaps on
the chart from the breakout rally in August. If you look carefully at
the prior gaps on the chart, you will notice that the futures used these
levels as support before bidding up fifty dollars or more. Secondly, if
the market were to fill this last gap around $1625, it will likely
trigger sell stop orders of those trying to buy off of the lows of
January 4^th with tight stops. Lastly, this level also
pinpoints the convergence of two major chart trendlines, which
technicians will likely use as targets for a reversal.

In short, while the Gold starts the week with a case of “The
Mondays”, the daily chart is still providing fairly solid targets for
traders. The strategies that I continue to recommend are all based on
technical levels provided by the daily and intraday charts. My long term
bias remains bullish, but while price action remains choppy,
recommendations on new positions will continue to have a day or
swing trade setup.

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