Gold and Copper Taking Divergent Paths

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Gold futures for April delivery on the Comex division of the New York Mercantile have recently seen a better-than-$100-an-ounce slide from the Feb. 20 high of $1,007.70. A rebounding U.S. stock market this week, combined with just a bit more risk appetite for many traders and investors, have been a bearish weight on the precious yellow metal.

However, price action late this week did see prices rebound from the early-week low of $981.10, basis the April gold futures contract, which is also right at trendline support from an uptrend line drawn on the daily bar chart from the November, December and January lows.

Gold market bulls were encouraged that trendline support has, at least temporarily, halted the slide in gold prices. However, the bulls need to continue to produce some upside price movement.

Now, a close below solid technical support at this week's low of $981.10 in April gold futures would produce significant chart damage and suggest that a market top is in place. It would also open the door to a fresh leg down in prices in the near term, including a challenge of solid chart support at $850 an ounce or below.

The gold market bulls would gain some fresh upside near-term technical momentum by producing a close back above strong overhead technical resistance at $945.50, basis April futures. That would again allow the bulls to focus on pushing and holding prices above major psychological resistance at $1,000 an ounce.

April Gold FutureSource.com & TradingEducation.com

Importantly, there is a very strong layer of technical resistance located from the $1,000 level up to about $1,020, basis nearby gold futures. This zone has in the recent past halted major rallies in the precious yellow metal. However, a solid push above this strong resistance zone would be very significantly bullish and suggest much bigger price gains forthcoming.

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At time of publication, Wyckoff had no positions in the stocks mentioned, although positions may change at any time.

Jim Wyckoff is a senior market analyst for TradingEducation.com a free educational Web site. In addition, Wyckoff writes a blog offering current market commentaries every morning on TraderBlogs.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Wyckoff appreciates your feedback; click here to send him an email.