Gold rallied to 655 and reversed as we anticipited earlier this week. Why did I say that 655 was a strong resistance resistance area? Technnically and historically, 655 is a heavy selling area. It is not difficult to predict. Simply drawing of a single line can help us. The difficult thing is to strongly believe that it is the selling area.

As a technical analyst when a market is rising, I would be looking for a potential market top and reveral areas and when it is falling, I would be looking for potential support areas where it can stop falling and reverse.

People developed many different types of indicators to predict the market movements. Some of them would use simple MA crossover system to complex mathematical calculations and indicators. They all work time to time.

The less common use is, candlestick patterns as technical indicators. On 25-Jan, market reversed after briefly tested 655. As we identified 655 as a potential selling area earlier, candlestick formed on 25-Jan is somehow confirming the importance of 655 level. It would be called a shooting star. Normally it can be found at market tops.

We won't be sure if it is going to work this time. There is still potential selling pressure exist as long as market is trading below 649~650 area.

The shooting star also reflect the forces between bulls and bears. Somehow, it would say that it can be used as a sentiment indicator.

Although entire daily trend is up, psychologically, the shooting star is self is a bearish pattern. Current pattern is also coincide with hitting the strong resistance area. (In fact, it is not coincidence. Shooting stars can normally be found at resistance area.) Therefore, it is worth to watch the 650 area carefully.

So, Monday and Tuesday will be interesting days to watch out.

Good Luck!

Thanks for listening!

Gold Trader

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