GOLD'S RANGE

  

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.    

 

CHART NOTES

• 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.

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