Technical Analysis: 10 December 2020

About the author:

Violeta Todorova
Author name:
By Violeta Todorova
Job title:
Senior Technical Analyst
Date posted:
10 December 2020, 8:30 AM

NASDAQ Composite – Deterioration in momentum

The NASDAQ Composite index has been trading in a strong secondary up trend since March 2020 posting a fresh all-time intra-day high of 12,607 overnight.

The secondary rally has extended to its 261.80% Fibonacci ratio (measured from its March 2000 high) crossing at 12,000 showing that selling pressure could arise soon.

The RSI indicator has reached overbought territory suggesting that the index could pull back in the short-term.

A large bearish divergence between the price and the RSI indicator has formed on the daily chart, showing that momentum is deteriorating, and that the market could take a breather in the coming weeks.

Given the overbought and deteriorating momentum conditions, we are of the view that a decline to the medium-term up trend line crossing at 11,600 could be seen.

Spot Gold – Still in a correction

Spot gold has been trading in a strong primary up trend over the past two years which is still technically intact.

After reaching a new record high of US$2,074 in August 2020 and overbought weekly and daily momentum conditions, the precious metal has entered a correction mode to unwind its overbought momentum conditions.

The weekly RSI indicator remains in its bull market range at this point, therefore we see the current pull back as a bull market correction.

The daily RSI indicator remains below 60% showing that the correction is not complete yet.

At this juncture in time, a break above its secondary down trend line crossing at US$1,925 is required to signal that the correction is over.

In the short-term, the price is likely to experience a mild pull back as the stochastic indicator has reached overbought levels, however the downside from here is likely to be limited.

Overall, our long-term view on gold remains bullish and we favor higher price levels in the year(s) ahead. The potential long-term upside price target is US$2,250.

Copper – Lifting our target

In our last update on the 16th of July 2020 we discussed the improvement in the momentum conditions and the likelihood of the price trading higher in the months ahead.

A strong rally has unfolded over the past few months and our medium-term upside price target of US$3.30 has now been reached and exceeded.

The recent price action decisively broke above its key resistance of US$3.32 and has confirmed a large double bottom.

The pattern has bullish implications and suggests that a new primary up trend has started.

The first potential long-term upside price target based on the breakout is US$3.90, however this level could be exceeded in the coming years. 

Iron Ore – Lifting our target

In our last update on the 26th of June 2020 we discussed that the correction from the July 2019 high is likely to be over and that higher prices are likely to unfold in the months ahead.

A strong rally has unfolded over the past few months and our initial upside price target of US$120.00 has now been reached and exceeded.

The current rally has pushed the weekly and daily momentum indicators into overbought territory, which points to a likely pull back in the short-term.

The weekly momentum conditions remain constructive and firmly in the bull market range and we favor higher prices in the coming months.

Therefore, we lift our medium-term price target to US$160.00.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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