Technical Sentiment: Bearish
Key Takeaways
Gold offered absolutely no follow-through for yesterday’s rally, mainly due to markets cooling off after the Malaysian Air flight crash.
Technical Analysis
From a technical perspective, this week’s decline below $1,307 invalidated the upswing configuration of Higher Lows and Higher Highs, signaling a weakness that may very well continue early next week. Gold currently trades around $1,311 as the US session is about to begin, with constant selling pressure on the smaller time frames. The selling pressure is confirmed by the first Lower High formed at $1,324.64, a perfect 61.8% Fibonacci correction based on the bearish swing from $1,344.86 down to $1,291.92.
As the precious metal continues lower, traders will focus on several key support levels where price is likely to bounce. $1,307 represents a crucial price pivot zone, just several points below current price level, and a sustained break below will open the way towards $1,300 and $1,297 (200 Simple Moving Average on the 4H time frame – a line perfectly respected on the most recent bounce). The third support area is located around $1,277, representing a perfect location for a Lower Low if the slide continues as predicted.
Free Reports:
It’s important to observe that on the larger time frames, Gold remains directionless, embracing a range personality with increasingly tighter ranges (Higher Lows and Lower Highs, indicating a Triangle chart pattern is forming). Based on this observation, traders should refrain from picking distant targets for trades, since Gold is likely to increase the frequency of whipsaws and reversals as the trading ranges narrow.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
