Bloomberg
Gold has traded so badly the last few months, that it’s starting to look good to some chart watchers.
“GOLD BEARS BEWARE,”Bank of America BAC +1.96% Merrill Lynch technical strategist MacNeil Curry told clients on Thursday. He warned against piling on to gold’s demise at current levels, because his reading of the charts suggest the downtrend may be in its final stages.
Curry based his call on the weekly ADX indicator, which measures the strength of a trend rather than its direction. It tracks the degree of overlap between weekly price bars: the less overlap, the stronger the trend, and the higher the ADX’s value.
And it doesn’t take a technician to see there has been very little price overlap the last few months. Check out Curry’s chart below:
Front month July gold futures settled down 1.5% at $1,211.40 an ounce Thursday, the lowest settlement value since August 2010. Continuous futures have now lost 24% since the end of March.  In electronic trading following the market’s close, futures tumbled through $1,200 an ounce, falling as low as $1,196.10, before rebounding above the key level.
“While gold has been on a relentless downtrend, the weekly ADX…says further weakness is limited,” Mr. Curry said. The ADX has run up to a “trend-ending” extreme level of around 50, he noted. Over the last decade, the three times it reached that level resulted in significant trend reversals in September 2011, March 2008 and May 2006.
For now, he sees support down to $1,200, and then to $1,155.
Meanwhile, a rise above $1,270 would indicate that a bullish trend reversal was developing