A double bottom basically happens when prices form two distinct lows on a chart, but it is only complete when prices then rise above the high end of the point that formed the second low. This last point can be tricky but you just have to stick to the "rule of what's written." In this chart you can see that at the time of this writing, price has indeed moved just barely above the high of the candle that formed the second low of the double bottom. Typically, but not always, the double bottom pattern signifies that there will be a reversal of a downward trend - that a downtrend is basically in the process of becoming an uptrend. Also typical, but not absolute, is the rule of thumb that the more 'prominent' the double bottom, the stronger its effect. Here, we do not have a very strong double bottom because the 3 candlesticks lying between the two bottoms have lows that are rather close to the lows of the bottoms, thus giving the appearance of a rather flat double bottom. Ideally, we'd like to see a few more candlesticks between the two bottoms AND for the two bottoms to be very pronounced in terms of how low they are in comparison to the candlesticks between them.

Another way of looking at a double bottom is that those two bottoms formed 'another' support line (which we could have drawn on these charts, but we didn't want to clutter things just yet) that now propels prices up. If you had read Gerald's prior article on how to draw S/R lines, then you would see that you definitely could have drawn one and it would have been beautiful because it would have been based off of extreme lows, it would have been based on very recent price action and it would have been based on not one, but two candlesticks - THREE very important factors in choosing how/where to draw a support line.

So in ACTUAL summary on the technicals, given the 'weak' double bottom, we'd have to go with a 60% vote for 'down' against a 40% vote for 'up' for a grand total of 10% voting down and 0% voting against.

We know things may look a tad bleak at this point, but that is ONLY on the technicals. Fundamentals are showing a very interesting and rare phenomenon - all of the recent sideways ranging movement for gold prices almost perfectly correlates with Greece and her efforts to obtain that bailout! This is rare because you don't often see fundamentals from ONE country 'controlling' gold prices so tightly across SEVERAL days in a row. Given the recent behavior of gold, as juxtaposed to Greek financial news, you can almost safely say that gold is ONLY listening to fundamentals at this juncture. Taking a slight pause here, we came across this funny, albeit crass, description of this effect from a random commenter on Marketwatch that goes by the username of Bastiat:

"'Greek hopes' should be sold in bottles. It is by far the strongest stimulant ever invented. It is cheap, based on nothing and can be used forever. It's like selling air in a bottle except that 'Greek hopes' will make you rich forever without having to produce anything ever. Disclaimer: 'Greek hopes' is ineffective in Greece only."

So just what IS going on with Greece? Well at the time of this writing, there is a lot of green across the board and gold is climbing just a bit with general news displaying headlines like: "Europe Up on Greek Hopes". Hmmm. Maybe Bastiat made a good point.

As negotiations get closer to the idea or concept of a close, we should see some more volatility for gold prices and hence perhaps a noisy exit from the recent tight range in prices we've been seeing. Although at the cost of heavy rioting and extremely disgruntled citizens, Greece is slowly but surely giving in to her European lenders' demands, which spells out a more positive vote for another bullish run coming some time soon. Looks like both teams are evenly matched AS WELL AS their coaches.

One can sure hope at this point that some kind of deal - ANY KIND OF DEAL OR AGREEMENT - gets finalized so gold can continue on her merry way up.

Happy trading!

- Gerald & Mitch

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