Still waiting for the 30 year Cup and Handle Breakout on Gold

I am still waiting. Are you? I am still waiting on this beast of a cup and handle chart to do its thing and get a breakout going from a 30 year cup and handle price chart.  When I think about it, it still boggles my mind how large this price chart formation is.  Yes indeed folks, if you were 20 years old in the year 1980 and familiar with the business of trading in stocks and commodities, then you would have had to wait until you were 50 years old for this cup and handle chart to complete its formation.

30 years of watching stock prices is a long long time for anyone that has been in this business. Heck, just watching prices of any security for more than a few days can be pretty exhausting.

I don’t mean to get too long winded here, but I am trying to just bring light to how huge an event this really is assuming it actually happens.  If the gold price is able to break out and hold above 1000 an ounce, then that by definition should mark the beginning of the breakout.  I am expecting this move to be almost a near vertical type of move that is quite persistent.  Surely there will be down days, but I suspect once things really start to get in gear we will see plenty of repeated up days that mark the epicenter of the breakout.

Never before have I seen a chart so large that has so much cause for an extended move.  The last time we saw this amount of trading cause for a move was the bull market that began off of the 1967 to 1982 sideways trading range that launched an 18 year bull market into the year 2000 in stocks.

Fascinating also is the fact that gold has already come quite a ways since the lows of 2001.  One might think that the move that has occurred since 2001 is too much of a move and that prices are ‘too high’.  But in the context of the whole trading range and pattern since 1980, one can clearly see that the move since 2001 was merely the right portion of this large cup formation setting up for an eventual breakout.

I remember thinking in 1994 during the stocks bull run that prices were ‘way too high’ and I looked at a very long term price chart of the bull market and could not believe my eyes how ‘steep’ it was and that it just seemed almost impossible that prices could go even more vertical… well we know what happened after 1994.  And do we know what will happen to gold after 2009?  I have a pretty good idea.

By the way, it is possible to measure price targets of cup and handle charts no matter how large or small they are.  Simply measure the depth of the cup and then add to the highest price point at the right side of the handle.  That comes out to close to 1800 on the gold price with assuming a 100% probability success rate of the cup and handle pattern.  Bulkowski in his book “The Encyclopedia of Chart Patterns” indicates that cup and handle patterns have a 50% success rate. So even with only a 50% success rate assumed we would still get to close to 1400 on the gold price.

Stay tuned because I have discovered a couple of other important features of the handle on this price chart. More on that later.