FREE Guide - 5 Chart Patterns You Need to Know!

Gold Breaking Above a Triangle Pattern

On January 12 gold futures (February) broke above a triangle pattern which extents back to late October.

December saw a higher swing low, and now January is seeing the price create a higher swing high. On January 13 the price moved above the December high of 1239, although only for a brief time (so far).

Figure 1. February Gold Futures - Daily Chart

gold 1.jpg

If the triangle (green lines) breakout is legitimate, the pattern provides a price target of 1345, which is right near the July high. If the price falls back into the triangle, and especially below 1200, it shows this was likely a false upside breakout.

Resistance is prevalent between 1240 and 1280, so reaching the upside target isn't likely to be easy. With a stop loss below 1200 or a 1180 (just below the lower triangle trendline) the risk/reward on the long trade is favorable. The downside is the trade is in the face of the longer-term trend.

Some traders may wish to see if this upside breakout is false, entering short near 1220 in alignment with the long-term downtrend expecting it to continue.

Seasonally, gold has a tendency to rally through January and February.

Get This FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!