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Gold: US$ 2,500 & Rs 60,000

Sat, 20 Mar Momentum Moves

   Previous Close   

   Pre-Open   

   SGX Nifty   

   09:30 am   

   12:30 pm   

   Closing   

The Week Gone By

The move from 15,000 to 14,350 and back to 14,800 was a perfect trader's week. The volatility was good for both the bulls and bears.

It's said on D-Street, "buy the dips in a bullish trend" and that is what bulls did on Friday.

From the lows of 14,350 on the Nifty, the move to 14,800 stunned the bears.

The Week Ahead

Do gaps in charts fill up?

Well, this is a question of debate among the Technical Analyst fraternity.

An answer to this question is found in the move of the Nifty on Friday.

The index was trading on bearish tone for the whole week. On Friday, after opening lower, it filled the gap of February 2021 between 14,336 to 14,469 and reversed sharply to 14,800 levels.

Nifty Daily Chart

 

The gaps (marked with green lines) on the daily chart above will be a key bottom in future weeks.

Nifty has also closed above the 50 DEMA (Daily Exponential Moving Average) marking the short-term bottom in place.

The weekly chart is also hinting the bulls now have an upper hand.

Nifty Weekly Chart

 

The weekly chart above is still in bullish trend as we are witnessing support zone on the rising trendline.

Nifty broke below the trendline during the week but managed to close the week just above the it.

Also, it took support at 13 WEMA (Weekly Exponential Moving Average) suggesting the bulls were in action at right time and the right price.

The RSI on the bottom panel is trending above 60, a bullish scenario supporting the price action.

Nifty will continue to trend bullish till the level of 14,350 is not breached.

Traders and Investors should look to buy the dips and cherry pick the best stock for investment.

Smallcaps and midcaps are still our favourites from a medium term view.

Gold - To Glitter Again

Gold has lost its shine since August 2020 after hitting US$ 2,000 and Rs 56,191 on the COMEX and MCX (Multi Commodity Exchange) respectively.

In the last six months, gold prices have corrected nearly 20%.

Should you buy the dip?

Yes, you should!

Gold is in a primary bullish trend and these dips are meant to be bought when it's trading at long-term support levels.

COMEX Gold Weekly Chart

 

The weekly price chart of COMEX Gold is trading at a multiple support zone which can be termed as a demand zone for bulls.

The orange line above is 100 WEMA (Weekly Exponential Moving Average) which was last tested in May 2019 and the price reversed just shy of the average in March 2020 during the pandemic fall.

Secondly the rising trendline support (green line) is placed right at 100 WEMA and the falling channel (blue parallel lines) also suggests the same support level.

The icing on the cake is the RSI (Relative Strength Index). It's highlighting a bullish reversal pattern where the price has not hit new low, but the RSI has hit new low.

The daily chart of COMEX gold is indicating the reversal structure.

COMEX Gold Daily Chart

 

In this chart, I've added the daily RSI and MACD (Moving Average Convergence Divergence).

As the prices are at support levels, the RSI has broken out of a falling trendline. The positive crossover of averages on the MACD is supporting the bullish stance for gold.

Coming to the Indian price chart of gold, let's look at the weekly chart of MCX Gold.

MCX Gold Weekly Chart

 

The gold price on the MCX made high of Rs 56,191 in August 2020 and fell to Rs 44,150 in March 2021.

There are four reasons why we believe gold is an excellent buy here.

1. The prices have retraced at the 50% Fibonacci level.
2. The 100 WEMA average has acted as a key support zone.
3. Bullish Harami cross candlestick pattern has formed on the chart right at the support of 50% Fibonacci retracement and the 100 WEMA.
4. RSI is in an extremely oversold zone. This is the third time since 2015, the RSI has tested the 30 mark and formed a major bottom.

The weekly chart of COMEX and MCX are both indicating a bullish scenario for gold.

We believe gold could test US$ 2,500 in COMEX and Rs 60,000 in the long-term.

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