August 17. 2009: Gold is getting ready to break out a symmetrical triangle with the potential of moving as much as 15% in the near future.

Both the gold exchange traded fund, GLD, and the gold futures contract, @YG, has formed a symmetrical triangle for a few months now and is getting ready for a break out. Please check the charts below along with the report:

• A break out of the triangle in either direction can take gold to its measured move targets shown on the charts. The measured move is calculated using the widest area in the triangle and applied to the breakout point to see how far prices can go. Note that prices have not broken out yet, hence the measured move shown on the chart is an estimate.
• Conservative traders take profits at 75% of the measured move
• For prices to make the measured move on the upside it has to clear resistance areas shown by the red horizontal lines. And on the downside prices must clear support areas shown by the green horizontal lines.
• We would book part of our profit at the red or green horizontal lines and leave the rest to make 75% of the measured move.

Caveats

• Technical analysis is about probabilities and can prove wrong
• Note that prices of gold have moved very close to the apex of the triangle. The closer prices move to the apex, the weaker the move out and lower the chances of making the full measured move.

Chart analysis

Gold's symmetrical triangle