Safehaven | Elliott Wave on Gold: Triangle Pattern Analysis

January 28, 2007

Elliott Wave on Gold: Triangle Pattern Analysis
by Dan Stinson

Short Term Forecast

Gold is in a triangle pattern and it currently appears to have started wave e down. We should see minor downside for the wave e count, before a reversal and subsequent breakout to the upside. The downside could complete as 3 waves or as 5 waves with further sideways action in wave e towards the apex of the triangle. A break below the lower trendline and the wave c low in the triangle would be short term bearish indicating further downside before a substantial move higher. A break above the wave b high before a pullback could indicate 2 possible scenarios. It could indicate a bullish breakout to new highs or more of a corrective pattern as wave (b) up to the $670-$680, before a pullback in wave (c). The action over the next few days/weeks will provide the clues to the future movements, but at this juncture, we are expecting a minor 3 wave pullback in wave e and then a subsequent breakout to the upside.

Our CRB chart also supports the Gold count which appears close to a reversal as well. Analysis on our Gold and Silver stocks also indicate a continued pullback before further upside. The Gold chart below illustrates the corrective triangle pattern since the May 2006 high and the second chart is the triangle pattern for the HUI which is more advanced in the wave e pullback.

When we see the price action for Gold pullback and then break above the top horizontal line on the chart, it will confirm a bullish breakout. A break below the lower horizontal line will be short term bearish and indicate that a larger corrective abc pattern is in play. The triangle for this scenario would then be counted as wave (b), with wave (c) to break through the bottom of the triangle. We should know which scenario will play out soon, since we will be looking for corrective downside action for wave e, before a bullish breakout. A bearish scenario would involve an impulsive decline in wave (c).

These charts are only a guide so that you can follow the action and watch for the expected bottoming action in the triangle. The action could play out exactly as illustrated or it may need adjustments as we follow it through.

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Dan Stinson
Elliott Wave Chart Site
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