The wedge pattern that has been building now looks set to resolve to the downside.
The next leg of the trade came in the form of a macro wedge pattern, as seen on the chart.
The metals have been on a big run higher over the last few weeks, breaking their descending wedge pattern to the upside.
On the charts, April gold futures have plunged out of a wedge pattern drawn on the daily chart, see Figure 1 below.
FORBES: Technical Trading: Gold Breaks Out of Wedge, But Sequester Looms
New York Comex gold futures have been consolidating within a rising wedge pattern, seen on the daily chart below, for several weeks now.
FORBES: Technical Trading: Gold Consolidates in Wedge, Bulls and Bears Battle It Out
Technically, the wedge pattern in the market is close to resolution.
On a longer-term basis the wedge pattern is still developing.
Hovnanian EnterprisesHovnanian Enterprises (HOV), while lagging some of our other picks of the last few weeks, has broken solidly out of a wedge pattern in the last couple days.
We watched the wedge pattern as the range tightened at the apex, and once again entered a core position when the pattern resolved to the upside in early April 2010.
In the week surrounding Christmas, the market consolidated even more tightly at the breakout level of the wedge pattern, giving traders an even tighter set of stop-loss parameters to measure their trade against.
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The Oil Service ETF (OIH) has been a big tell that the market was not out of the woods, and it took the plunge out of the tightly formed wedge pattern that the newsletter has been targeting.
The last two weeks created a nice-tight wedge type pattern that needed some new flows to ignite a first quarter move to the 1320-1340 zone.
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First Solar, Inc. (FSLR) broke out on big volume in August, and then consolidated in a beautiful, coiling wedge-type pattern that was broken on not enough volume in October.
When a stock or index breaks out of a multi-month consolidation pattern like that wedge, the next move in the direction of the break generally lasts about the same length of time that it took to form the pattern.
FORBES: How Technical Analysis Has Given Great Trading Cues All Year Long
What is more interesting is this final fifth wave is showing a pattern that looks like a wedge-like formation, commonly known in Elliott Wave circles as a diagonal triangle.
The resulting action is a coiling pattern, also known as a rising wedge.
FORBES: Technical Trading: Gold Consolidates in Wedge, Bulls and Bears Battle It Out
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