Gold Support and Resistance Lines
Some people will complain when they see a chart with a lot of lines. What those who complain fail to realize is that more lines can help reveal the hidden structure of price for a given market.
At a later date we'll look into the more esoteric structure of prices. Let's just say for now that the sometimes preferred clean, two-dimensional charts that some are so fond of looking at are inadequate to capture multi-dimensional markets that extend beyond just three.
The above chart was constructed using the intersections (or crosses) of two sets of Pitchfans (a combination pitchfork and Gann fan. The origination points for each Pitchfan are by no means random.
The chart has as its framework a Gann Square. Why a Gann Square? Well, the short version is because a Gann Square uses a 45 degree angle which allows time and price to be squared. What is squaring time and price and why is it important?
Gann did his work on graph paper. When you draw a 45 degree line through the corners of a square you are showing that for each unit of time (day, week, month or whatever) that price is moving up one unit (pennies, dollars or whatever). What good is that?
Well, using 45 degree angles on a chart you can determine for any unit in time what level price can reach. If price doesn't reach that level in the given time, then it's possible it will reverse. That's something handy to know when you're investing money in markets.
By utilizing the Gann Square it ensures that the chart squares time and price. Once time and price are squared then it's possible to put the Pitchfans in the proper location. Let's look at our chart again...
Now let's zoom out to get a wider view...
The Gann Square tool creates a series of equal sized grid squares. The Pitchfan running from the lower left starts at $252.50 which was the pivot low price in 1999 before the bull market in gold really got going. The other Pitchfan starting in the upper left corner runs from the top of the same grid square at the $2,279.60 level. The four red arrows point to the corners of the larger grid square.
From there, wherever any two Pitchfan lines intersected a horizontal line was drawn. When many horizontal lines are close together they appear darker on the chart and are considered to be stronger levels of support or resistance. Let's look at our zoomed in chart again...
Some notable things about this chart:
The darker lines show levels of increased support or resistance;
There is a Pitchfan line highlighted by larger red arrows that has acted as overhead resistance for the gold price since 2013;
Below $1,037.40 there is essentially a zone of no support / resistance that runs down to $1,004.50 - so that might be a key price level to watch should the gold price dip lower than that level
As an aside, some people when they look at charts, expect either to be told explicitly what the chart means or what they should do. Sorry, but that's not going to happen here. These charts are intended to be used as a map of sorts in order to see the lay of the land. If you like, you can use the map in concert with whatever tool(s) you'd normally use - figuratively a compass, for example - to guide you. The map can help orient you in the proper direction, but it isn't going to tell you where to go. You have to decide that for yourself.
Some people, for whatever reason, will spend a good deal of time trying to convince you that North is South and South is North. It's easy to become disoriented at times. Having a map and the know-how to use it properly will help keep you from getting lost.
Chart Analysis uses a combination of technical analysis and cycles to provide insight into the future direction of precious metals, currencies, stock indices and more.
