Interactive Investor

New price targets for gold and the FTSE 100

23rd November 2021 07:30

Alistair Strang from Trends and Targets

Loading

Share on

Independent analyst Alistair Strang studies recent performance of the yellow metal and also explains why he distrusts price spikes. There's another look at the blue-chip index too.

Gold

Less than a few weeks ago, we covered gold, finishing our report with the weasel words: “If gold now intends a bit of a meltdown, the price needs below $1,813…” Guess what, it didn’t take a few emails to ask for an update, movements on the yellow stuff being painfully dramatic on Monday 22 November.

Once again, with gold we can see a perfect example which justifies our pedantic nature, when we remember to add the important caveat which demands a product close a session above a trigger level. In the case of gold, it failed to close above $1,873, instead enjoying a spiteful little spike upward at 1pm on 16 November to $1877, then immediate retreating.

Yet again, this reinforces our utter distrust of price spikes, anywhere in the marketplace. Far too often, an upward spike is the prelude to reversals, the opposite true of a downward spike.

Alas, this cannot be trusted as a hard and fast rule, a minute by minute glance at gold prices showing it happens all the time. However, when a spike blasts through something we regard as an important trigger level, this generally suggests extreme care should be taken.

Source: Trends and Targets. Past performance is not a guide to future performance

The price of gold has now enacted a pretty awful movement, retreating below the blue downtrend dating back to mid-2020. If this were a share price, we’d be truly alarmed, expecting the worst.

The immediate situation threatens weakness below $1,802 dripping down to an initial $1,794. If broken, we’d hope for a solid bounce at $1,768 eventually. Unfortunately, there is a greater danger by retreating below a Big Picture trend, the price now taking up residence in a zone which allows an eventual trip to $1,695, if our target levels keep breaking!

Of course, there’s always the risk we’re ‘only’ witnessing a market having fun at traders' expense. If this is the case, any improvement capable of exceeding $1,828 should probably be taken seriously, as the metal will doubtless experience a surprise pace of recovery, once again with an initial ambition of $1,873 and hopefully above.  In this instance, we’d hope closure above 1828 shall provide a reasonable triggering event.

The FTSE 100

Quite a few folk are expressing alarm and confusion with FTSE 100 movements. We’re inclined to agree with most sentiments expressed, thanks to immediate movements making less sense than a Boris Johnston speech to industry.

About the only thing which makes a slight degree of sense is the FTSE wants to go up, perhaps being restricted by other world markets attempting to retreat.

Closing Monday at 7,265 points, the UK index needs to trade above 7,285 points (not with an opening spike) to enter a cycle to an initial 7,321 points. If bettered, we can calculate a secondary at an amazing – and therefore unlikely – 7,378 points.

The alternate scenario allows weakness next below 7,207 to point at reversal to an initial 7,193 points. If broken, we suspect it shall eventually bottom at 7,124 points.

Source: Trends and Targets. Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up