Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Technical Analyst for City Index. Welcome back to another lesson in technical analysis and chart reading. And as always this is simply for information and educational purposes only.

We're going to take a look at market analysis on multiple timeframes and, of course, using technical indicators and chart patterns. And in this particular lesson we're going to continue in line with what we taught you in the last lesson by taking a look at the FTSE 100 but today we'll take a look at a different market.

So have a look at this. This is the February futures chart of gold. And of course 2010 saw gold rally by 28 per cent. That was a very, very good move. So what is in line for 2011 for the price of gold? Is there anything that stands out in particular?

Well we can see from the July 2010 low that the market went straight up and then recently, over the last few months, the market has been making a series of peaks, in other words we're seeing higher highs and higher lows, but it appears as if the market is now rounding off.

Now if we apply the classic 20-day moving average, is there anything that the market's telling us from this point of view?

Well currently gold prices are trading below the 20-day moving average. Now the one thing about moving averages, it's great when the market's in a trend but when you start getting sideways action you can actually start giving back some of your profits and even taking some losses. And that's what is appearing to happen on the price of gold as we speak over the last few months.

Now, you've got to determine what the major current trend is and that is useful by taking a look at the weekly charts. And we also want to see if there are any clues as to what stage we're in. In other words, what is the major pattern telling us, are we trading towards the upside, downside, is it a pull-back or is there consolidation going on? The classic patterns will always assist you in answering that.

Then, of course, we want to buy and sell the breakouts above the highs and the lows and we want to try and use the most simplest technical indicators rather than trying to overcomplicate things.

This chart over here, it's the same market but of course it's in a different timeframe. This is the weekly chart.

And what do we notice here? We see that the market's been in an up-trend. We saw the market make a high in December before pulling back in 2009. And then we see the marketing making a high in 2010 at June before pulling back again but forming a higher high and a higher low. And then, of course, ending 2010, what is the classic pattern? It's a sideways channel.

So right now we can say that the market is consolidating. It's not actually pulling back it's not going higher, it's just consolidating.

And we will have to wait to see which direction the market's going to go next. Ideally if this is going to be an up-trend we wouldn't want to see a break above the December high otherwise we could see a breakdown below the channel and that would then form a correction in the up-trend.

Now we've used parabolic indictors before and that's what we're showing in this example here. And again this is a weekly chart.

And we notice that for the first time in many, many, many weeks the parabolic indicator has broken to the downside.

So that's an early warning signal that although we're consolidating it appears that we could be trading towards the downside. And if that's the case then you would want to be looking at potential sell signals and sell set-ups.

So here what we have is the candlesticks pattern and you notice that the market made three peaks to the upside. We have a weekly low at 1,352 and that's a bearish engulfing candlesticks pattern. If the market goes below 1,352 we could say that our stock could be just at the wave three, or the peak three high and then we could look for a continuation to the downside.

Now from point a to point b there was a $9 decline and we could look back and say that if the market's going to make a similar decline we could look for a $9 or thereabouts pull-back again which could take us down towards a 1,317 if we break below the 52 area, at least where the support is.

So try to use this form of trading in multiple dimensions by looking at daily and weekly charts, have a look at the overall trend and then look at the market structure to see what the patterns are telling us and then candlestick patterns to help you get in and out of the markets

I hope this has been useful for you. As always look at the bigger picture and enter on the shorter timeframes in line with the main trend and use the candlesticks patterns to assist with reversals and of course keep it simple.

In the meantime have a great trading week and I look forward to seeing you in the next lesson. This is Sandy Jadeja.