Gold and Silver chart patterns: an update

Gold Chart Pattern

Two weeks ago, gold's price had begun a correction after testing the Dec '11 top of 1770. So far, the 20 day EMA has provided good support to the price. The corrective pattern is looking like the 'handle' of a bullish 'cup and handle' pattern. That means a likely upward target above the 1900 level and a test of the all-time high touched in Sep '11.


The technical indicators are reflecting the effects of the correction. The RSI is sliding, but is above its 50% level. The MACD is positive, but has slipped below its signal line. The slow stochastic is looking bearish by falling below its 50% level, but is trying to turn around. Gold's price is trading above all three EMAs - the sign of a bull market.


Add, with a stop-loss at 1650. Conservative investors can wait for a convincing move above 1770 to enter.


Silver Chart Pattern

Silver's chart pattern shows that despite spending three weeks above the 200 day EMA - which should have been a bullish sign - the 20 day EMA has failed to cross above the 200 day EMA. The formation of a bearish 'rounding top' pattern is another concern for the bulls.


The technical indicators are beginning to look bearish. The RSI is steadily falling towards its 50% level. The MACD is barely positive, and has crossed below its signal line. The slow stochastic is below its 50% level, and still falling. Looks like silver's price is in danger of sliding back into a bear market.


Enter only on a convincing break above 36.

Stock Chart Pattern - Colgate Palmolive India (an update)

I had written an analysis of the stock chart pattern of Colgate Palmolive almost two years back. It was interesting to go through some of the comments on that post – including one where I had mentioned that the stock could be bought at any price.

In a post on FMCG sector stocks in Jan ‘11, a brief update was provided. The stock was consolidating within a symmetrical triangle after touching an intra-day high of 996 in Nov ‘10. Partial profit booking was suggested as the stock had entered the triangle from above, which indicated a possible break below the triangle.

The one year bar chart pattern of Colgate Palmolive shows some interesting technical developments that exemplify how strong the stock is technically:

Shortly after I wrote the brief update in Jan ‘11, the stock dropped below the triangle, took support from the 200 day EMA as expected, and jumped back inside the triangle. That was a warning of what was to follow.

By the end of Jan ‘11, a high volume break down breached the 200 day EMA and reached an intra-day low of 783 on Feb 2 ‘11 – correcting 21% from the Nov ‘10 peak of 996, slightly underperforming the Sensex (which lost 18%).

Despite spending several trading sessions below the 200 day EMA in Feb ‘11, the stock started to recover and by Apr ‘11 had moved up to the resistance level of 918 – its closing high in Sep ‘10. A sideways consolidation till May 10 ‘11 culminated in several unsuccessful attempts to break out above 918. The negative divergences in all the technical indicators ‘resisted’ the break out attempts.

A correction in a narrow downward channel breached the 20 day EMA but found support from the 50 day EMA. Today’s spurt on good volumes pushed the stock above the 918 level once more – but not convincingly as yet.

Note that the entire corrective move after touching the Nov ‘10 peak, including the consolidation within the symmetrical triangle, has formed a bullish cup-and-handle continuation pattern. A test and likely breach of the previous top is on the cards.

The technical indicators are turning bullish. The MACD has changed directions in the positive zone, though it is still below the signal line. The ROC has climbed above its falling 10 day MA into positive territory. The RSI bounced up from the edge of its oversold zone and is touching the 50% mark. The slow stochastic has moved up from its oversold zone towards the 50% level.

Fundamentally, the stock remains as solid as ever – growing its top and bottom lines, generating a ton of cash from its operations, with negligible debt in its books. The reserves have been built up considerably. A bonus issue won’t be a surprise. Like most FMCG companies, margins are under a bit of pressure.

Bottomline? The stock chart pattern of Colgate Palmolive is poised to test, and possibly breach, its all-time high of 996. The stock has been in a bull market since touching its 2007 low of 300 – tripling in four years. This is the kind of stock that small investors should buy whenever they have some spare cash, with the object of leaving it as a family treasure for future generations to enjoy.