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Hello and welcome to Cantos Charts Masterclass. I'm Sandy Jadeja, Chief Technical Analyst for City Index. Welcome to another lesson in technical analysis and chart reading. As always, these are simply for information and educational purposes only.

Well today we're going to take a look at a very popular market. A lot of people have been emailing in about this market and we're going to look at using basic technical analysis to get an idea of where this market is going. We want to take a look at the current price action, we will take a look at candlesticks patterns and of course we'll take a look at the current trend.

So what is the market we're going to discuss today? Gold. That has certainly hit the headlines recently. You can see this really nice move from the $1,159 area. No pullbacks at all. This market has just been going all the way north.

This is the December contract. Now a lot of people have been asking are we going to be reaching that $1,300 level. Well, we're almost there right now as we speak. So the round numbers, as I've said before, are really important. The key question is what's going to happen once gold reaches $1,300. Now typically you'll often see a little bit of profit taking take place, maybe the bears might come out and say actually this market shouldn't be this high. We've had a straight run up. This market is deserving a pullback. So all sorts of things can happen at that $1,300 level.

If you've been riding this bull trend, maybe it's time to say well actually you know I want to tighten up my stops here. Maybe I'm going to be looking for signs to see if this market is going to reverse.

Now we've talked about runaway markets in the previous lessons and ideally, these are the markets we're looking for. So at the moment, there's nothing stopping gold unless of course we hit some major barriers.

Now it's trading above its 20 day moving average. That's a good sign. That's bullish, so there is no point saying let's turn bearish here right now.

The parabolic SAR I really like this indicator. This is interesting because right now the price of gold is coming close to the parabolic SAR. Not so much to the 20 day moving average, but certainly the parabolic SAR. So remember, the parabolic SAR is a stop and reverse indicator. If the price of gold, which I think it's going to start getting a little bit more volatile from where we are, if the price of gold starts to get more volatile, we will probably tighten up that SAR. In other words, it will get closer to the price. So if it starts breaking on the daily chart below that indicator, that's your cue to say you know what, I'm banking my profits here, maybe it's time to get out. You're not always going to catch the exact top, but that's not the point of trading. Now here this is the weekly chart, what do we notice on the weekly chart? Higher highs, higher lows.

So the longer term trend suggests that $1,300 might not be its stop. I've certainly heard many traders talking about the $2,000 level. Do I personally think it's going to get there? There's nothing stopping it because at the moment we have got the higher highs and the higher low. So the trend remains up.

From the $1,300 the next target is going to be $1,400 and of course the big round number the $1,500 level. So let's see if gold can continue.

The $1,159 is such an important support level on the intermediate term trend. If that level is taken out, the dynamics can change of course, but at the moment, we are still bullish on this market.

Candlesticks, well we had a hammer just at the $1,159 and that was suggesting after we had the pullback that if we took the high of the hammer out, that would have been an indication to go long and of course, that's what's happened. We haven't had any real major problems along the way. We had a spinning top as you can see by the red candlesticks pattern there, but the market didn't break the low there; it just continued higher. This is a great trade. In fact, for 2010, this has probably been one of the greatest trades that's been out there for a lot of traders.

Now of course we are reaching the round number. As I said, the $1,300 is key. But notice on the weekly chart, the parabolic SAR is quite a way from the current price level. That's telling us that there is still some good momentum left in this market on the weekly charts.

The stochastic is actually still crossed to go up. That's not telling us that the trend is about to change. In fact, we haven't even reached the lower side on the stochastic, so in other words, even if the markets pulled back, the stochastic indicator crossed to give us a buy signal and we're almost reaching the overbought zone. But we're still quite away. So could we reach $1,400? Probably, but let's see how the $1,300 level pans out in the next week or so because it's certainly interesting to watch that.

So always keep an eye on the higher timeframes. Combine the weekly along with your daily charts and of course, if the weekly charts are bullish, there is no need to go bearish. You would only go bearish on the short-term chart if you're a very short-term trader, so you would trade with that lower term timeframe and of course pay attention to the important support and resistance levels which we've highlighted in this particular presentation and the parabolic SAR, keep a really good eye on that because that's a really good indicator to show us when the markets are about to change trend.

Well, let's keep an eye on gold. I hope the profits stay with you. In the meantime, have a great trading week. This is Sandy Jadeja.

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