Next Stop for Gold Is $2,100 Not $1,300

July 2, 2009 by goldguru

By Jordan Roy-Byrne/Trendsman, GoldSeek

Practically everyone in the gold community has mentioned the inverse head and shoulders pattern on the gold chart and the corresponding $1,300 target. The target is correct but the interpretation of the pattern is not entirely correct. That target comes from the pattern being a reversal pattern but in the current case of Gold it is not a reversal pattern. There is no downtrend it is reversing from. However, the pattern can actually function as a continuation pattern as John Murphy explains in his book,
Technical Analysis of the Financial Markets:

“In the previous chapter, we treated the head and shoulders pattern at some length and described it as the best known and most trustworthy of all reversal patterns. The head and shoulders pattern can sometimes appear as a continuation instead of reversal pattern. In the continuation head and shoulders variety, prices trace out a pattern except that the middle trough in an uptrend tends to be lower than either of the two shoulders.”