The Bull Flag in the Monthly XAU Chart

The previous post discussed some significant breakouts in the Euro charts, and the post before that showed some major developments in the US Dollar chart. All of this was meant to be indirect bullish evidence in favour of gold and gold stocks. In this post, let's have a look at gold stocks directly.

In order to understand the upcoming chart, I would urge you to read the following two articles:

• Ripples, Waves, and Tides
• How to Use Volatility to Make Trading Decisions

These articles go over why the long-term gold stocks chart looks so bullish, and the reasoning behind this bullishness. Here is an updated version of the chart mentioned in those articles:



If you do not have time to read the aforementioned articles, here is a summary:

First, a bull flag has formed. Traditional technical analysis suggests that once prices breakout out of the flag, the subsequent rally should be approximately equal the height of the flag pole, which would take the XAU to the 210 area or more, in this case. The XAU has just broken out of the flag.

Second, the bollinger band width has just triggered a buy signal. It has touched the "launch pad" and bounced off. This is another long-term buy signal. You can see for yourself that whenever the bollinger band width reaches the launch pad level, a huge price movement follows.

Third, the indicator at the top, which is not stochastics, but based on volatility, has given a buy signal by crossing over 20.

Finally, the XAU is approaching levels not seen in the history of the index's existence. This can be viewed as a giant bullish triple top breakout. All in all, this all equates to a tremendously bullish situation for gold stocks. This does not necessarily mean that gold stocks will rise tomorrow, but it does mean that they will likely be much higher in the weeks ahead.