Chart of The Day
Continuous Contract (GC1 Comdty)
This is the daily chart of the continuous contract of gold, which has range bound for nearly two weeks. Today we are going to look at volatility based support/resistance (VBSR) which defined this potential range before it came to be. Then, we will look at how this information can still be quite helpful.
- The concept of support/resistance is one of the most elegant and meaningful in technical analysis.
- N Bands are statistically valid immediate support/resistance. They are also built with adaptive and non-lagging components. These are what make N Bands so different from other types of bands.
- N Bands define the playing field and are comprised of a zone from a solid line to an inner line which is exactly one average true range (ATR) apart. We use ATR to measure the market noise. So our concept of support/resistance is not a hard edge but a zone where the effects of support/resistance become evident.
- From significant peaks/troughs in the N Bands we derive projected levels of support/resistance. The most recent examples are shaded.
- Currently gold is respecting a range between 1608 - 1510 that was created by VBSR.
- If gold continues to linger within this range, the bottom level will most likely drop to near 1450-1425 creating a potentially wider and lower range. This is because a new trough in the lower N Band is developing (an extreme volatility event which market participants have already reacted to).
- If gold were to break the 1608 level, then it would open up trading between there and near 1700 where there is overlapping projected VBSR.
With known tendencies that have been quantitatively demonstrated across several markets and time frames, it is easier to lean against volatility based support/resistance. And this is before including any other technical work, like momentum or trend. You can view the statistical evidence for MetaSwing's components here:
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