Gold just broke above the falling resistance line (and those who own gold are probably happy about it, especially if to get additional passive income from it), and it remains below the two recent highs, as well as the 76.4% and 78.6% Fibonacci retracement levels.
I don’t care as much about gold breaking above the falling resistance line as I did when it moved above its previous analog line – in December – just before it topped out. Or I could say I do care, because it’s another sign of ‘be careful, the top might be very close’, and not a simple ‘buy signal’ that the classic technical analysis workbook would have suggested.
Silver’s fake outbreaks
As a side note, whatever the technical rule is, before applying it, make sure you check whether it has actually worked in the market you are analyzing. For example, since silver is known for its fake breakouts, seeing a breakout there should NOT be taken as a buy signal. (That’s one reason why silver is a very difficult market to trade for beginners.)
Let’s put things into perspective… We are in a situation where several other markets are also about to reach their resistance levels – or have already done so. Because markets are interconnected, it is often the case that we can infer something about one market while looking at another. Sometimes it makes fundamental sense (gold stocks and gold; commodity stocks and commodities, gold and silver), and sometimes it doesn’t (the contagion effect that can cause several emerging markets to collapse at the same time, even though their economies are not that connected). ).