V.2:3 (84-86): June, 1984 Gold: Studies in Price Action by Jesse H. Thompson

V.2:3 (84-86): June, 1984 Gold: Studies in Price Action by Jesse H. Thompson
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June, 1984 Gold: Studies in Price Action by Jesse H. Thompson

The recent March trend reversal, as represented by the activity of the June 1984 Gold contract, is an excellent study of the interaction of price with natural resistance levels, as well as illustrative of the process of "distribution to the side".

The most important natural resistance areas for the June 1984 Gold contract relative to the recent rallying activity are the natural divisions of the range formed by the last major monthly peak and the last major monthly bottom. For the June 1984 contract this was the 473.50 top of July '83 and the major low at 374 in January 1984 (refer to Chart A). Once the monthly bottom at 374 was defined by the rally in February, the range was also concomitantly defined as 99.50. From this range we can quickly calculate potential resistance at a .382 (38.2%) range division which is 412, with the next important level being a .50 range division or 423.75. It is also helpful to calculate the midpoints between the .382 (38.2%) and the .50 (50%) level (or the .50 (50%) and the .618 (61.8%) level) as the actual tops or bottoms often occur near exact midpoints of two important price resistance levels. This level for the .382 and the .50 percent range is the 418 dollar price level.

Therefore, as June Gold rallies to correct the oversold bear market condition prevelant at the 374 bottom, we can expect potential resistance at the first important levels of 412, 418 or 423.75.

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