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Must See Charts: Possible Gold Breakout to Downside

NEW YORK (TheStreet) -- Gold futures for June delivery are taking it on the chin today as stocks continue their march higher. June futures are trading down $24.30 per ounce as of this writing, at $1,576.60 per ounce.

The SPDR Gold Shares (GLD) is down over $2.00 per share, currently trading at $152.63. Gold has succumbed to chart selling as futures were not able to maintain meaningful trade above the psychologically important $1,600 level. In addition, with today's selling gold has made a clear break below some key moving averages such as the nine- and 20-day exponential moving averages (EMAs.) This appears to have triggered a cluster of sell stops, which are likely largely responsible for today's slide.

Outside markets did not do gold any favors either, with oil futures trading lower today while the U.S. Dollar Index (DYX) once again moved higher. Gold certainly appears to also be under pressure as stocks continue their seemingly non-stop ascent and investors pull assets from perceived safe-haven instruments and put more money to work in equities and other risk assets.

The question is, where will prices stop? It appears likely that gold futures will now test the March lows at $1,562.50. Should this area not hold, then a test of the February low at $1,556.40 could be in store. The trend is clearly down on the daily and weekly time frames. However, the weekly chart does appear to show a rangebound market more than anything else.

Source: QST

This chart begs the question of whether or not the $1,550 area will hold again as support.

Another unsuccessful test of this level could prove to be a great buy, while a break could send gold prices sharply lower. An unsuccessful test of this level may be a good put selling opportunity as well as an area to get long futures.

There are a number of different ways to play the market should prices test this key area again. Feel free to contact me to discuss any questions you may have or to discuss structuring a trade for you based on your market views and risk tolerance.

Please note today is April 2, 2013, and any trade data are based off the most recent information.

Futures and options trading is inherently risky and unsuitable for all investors. Past performance is not necessarily indicative of future results. Stop-loss orders intended to limit losses to certain amounts may not be effective because market conditions may make it impossible to execute such orders. Option writing has unlimited risk and an investor may lose more than their original investment.

Commodity Futures Trading Commission disclosure for licensed brokers: This material is conveyed as a solicitation for entering into a derivatives transaction.

Matt Zeman is a trader at Kingsview Financial. He began his trading career as a runner in the grain pits at the Chicago Board of Trade before becoming an arbitrage clerk. Eventually he started trading equity options and stocks. Matt now is a full-time futures broker and also authors a blog for gold investors at Appreciate Gold. He has been a frequent guest on CNBC, Fox and Bloomberg, and provides his views on the stock, bond and futures markets for financial media including Dow Jones, the L.A. Times and The Associated Press. Matt is a member of the Chicago Board of Trade, and carries series 3, 7 and 66 licenses.

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