Figure 1 is a daily chart of the GLD. The yellow (and sometimes red and yellow) dots on the price charts represent key pivot points. Key pivot points represent the most intense zones of buying (support) and selling (resistance). A "typical" bottoming pattern would be for GLD (and most assets) to trade below a key pivot point or support level taking out stops and then reversing higher. Recent price action has GLD trading below the key pivot at 133.51.

Old support now becomes new resistance. Prices then found a bottom near the next level of support at 129.64. Prices pivoted higher and are now trading back above the nearest key pivot or resistance zone at 133.51. This "typical" price pattern was seen throughout all of 2010, and is noted on the chart by the shaded rectangles labeled 1 through 3. This is a common bottoming pattern.

Figure 1. GLD/ daily

More importantly, the key pivot at 129.12 (labeled with black arrow) really becomes our "line in the sand". Trade below this level implies a much deeper correction, and this would be reason enough to move to the sidelines.

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2011 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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