As of the close of September 30, 2011 there is a small symmetrical triangle formed in the daily chart of GLD, also known as a pennant. This chart pattern is usually a continuation formation that duplicates the move preceding it. Thus, the objective of the pennant formation is near $143 or around that price. However, there are some warning signs about this chart pattern.
The reliability of pennant formations is not that high. What is more important though is the fact that the objective of the formation lies below the 200-day simple moving average and below support at $150. At the same time, there are two large gaps that were left behind last week, which scream for a closure.
Furthermore, both the RSI(14) and MEI(14) have double bottomed at oversold territory. Therefore, there are several reasons for me to suspect that this pennant formation may fail as a short signal besides being so obvious to the naked eye.
Beware of Greeks bearing gifts. I think the title was relevant given the Greek debt troubles that currently mark most major market moves.
Disclosure: No relevant positions.
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