Support Test Coming Up For Gold

In my last post, I identified a continuation reverse head and shoulders pattern, and expected GLD to test support in the 106 area. Well, we are just about there. GLD closed yesterday at 106.30 and had a day low of 106.24. How important is the 106 region? I drew as many trendlines and Fibnocci retracement levels and fan lines as I could going back 18 months:

Let's zoom in ...

• GLD did retrace 50% of it's move since last April

Let's zoom in at the last 5 months:

• The higher green line is the 38.2% retracement level for the rise since last April
• The purple trendline  is a key support line
• The 2 light blue lines are Fibonacci Fan lines going back to Nov 2008

If GLD does not hold here then the falling channel outlined in red lines will trump the continuation reverse head and shoulders, which would mean a deeper consolidation. Pay attention also to the price by volume bars on the left, as well. Another decision point ...