Premium Market Wrap 09.11.13

Gold has been unusually quiet lately, but could be on the verge of a major breakout opportunity soon, as early as tonight. Crude continues to sit on major support and also formed an extremely narrow range today, which could provide some fuel for a solid breakout.

Narrow Range Day

The daily chart of Gold futures shows price traded in an extremely narrow range during Wednesday’s session, totaling only 12.7 points on the day, which is more than 50% less than its current 10-day average daily range of 26 points.

When price compresses in this fashion, you tend to see major breakouts in the upcoming session. Moreover, these breakouts usually lead to price ranges that are significantly greater than average. Therefore, if Gold gets a breakout from the current range, look for price to not only trade a range that equals its average of 26 points, but also to exceed it by about 25%, which is 32.5 points.

Bullish on Gold

I still think Gold is headed much higher, likely to between 1480 and 1500. However, I’m not sure the pullback is done yet. While I’ve been pounding the drum about support at 1350, I could see a scenario where Gold pulls back to 1339, or even as low as 1276.5, before responsive buyers engage. The point is, Gold remains positioned to head higher, but we still have to find our low before we can begin to get long.

Until then, look to trade the breakout of the current range, which spans from 1356 to 1369, as a breakout could be worth 32.5 points. Also, keep in mind that Gold breakouts tend to occur during the overnight session, so this could be an opportunity that occurs soon.

Swing Targets

Once direction is decided, be sure to check the monthly and weekly ADR targets below for potential exits. As of right now, an upside break through 1370 has a weekly bull target at 1395.80, while a downside push through 1356 has a 100% weekly bear target at 1341.90.