Gold hit all-time highs, catching the attention of investors worldwide.
The rally looks impressive, but does the market have enough fuel to keep pushing higher? Or is this the perfect setup for a bull trap that could catch even seasoned traders off guard?
I’m breaking down the key technical levels, chart signals, and possible scenarios—both bullish and bearish. We’ll look at what the indicators are really saying and which signals could hint at the next move.
What should you watch for to profit instead of getting caught in the market’s trap?
In today’s article, I decided to share with you my insights from today’s Quick Gold Alert. Have a nice read!
Technical Picture of Gold
In yesterday’s Quick Gold Alert, you could read the following:
The first thing that catches the eye on the above charts is today’s breakout above the key resistance zone based on the red gap ($2,885.05-$2,893) and the upper line of the medium-term orange rising trend channel.
Thanks to this price action gold futures also came back above the barrier of $2,900, which resulted in a climb above the last week’s highs and the upper border of the very short-term green rising trend channel.
(…) the bulls showed strength that had not been seen for many days, which translated into a fresh all time high of $2,933.81.
What’s next?
Taking all the above into account and combining it with the lack of the sell signals generated by the 4-hour indicators (…), it seems that we could see further improvement and a test of the next resistance zone (created by the 150% Fibonacci extension [based on the late Oct. – mid. Nov. Downward move] at around $2,945 and the potentially important level of $2,950) in the coming day(s).
From today’s point of view, we see that the situation developed in tune with yesterday’s bullish scenario and the futures extended gains, not only testing, but also breaking above the mentioned next resistance zone.
Thanks to the bulls’ rally, the price hit a fresh all-time high of $2,968.39, approaching the next resistance level marked on the 4-hour chart – the 161.8% Fibonacci extension based on the late Oct. – mid- Nov. downward move (at around $2,977).
Despite today’s bulls’ incredible achievement, they didn’t manage to push the futures higher, which translated into a pullback to the previously broken upper border of the green rising trend channel.
At the same time, the 4-hour indicators (the Stochastic Oscillator and the CCI) generated sell signals, suggesting that further deterioration may be just around the corner.
Will we see such price action?
In my opinion, it will be very likely and reliable if the bears take the futures under the above-mentioned support line.
Why?
Because in this way they will invalidate the earlier breakout, which would be a serious negative technical development, which will likely trigger further deterioration and test of the next supports.
What do I mean by that?
Let’s take a closer look at the chart below.
From this perspective, we can see that the breakdown under the upper line of the channel, will result in a test of the lower line of the very (very) short-term black rising trend channel, which is slightly below the 38.2% Fibonacci retracement and together with the previously broken Feb.2 intraday peak they all create the first bears’ downside target (around $2,900 - $2,906).
What’s next?
If this area withstands the selling pressure and the bulls manage to protect it, a rebound could be in the cards.
Why?
Because if the price bounces it off, we’ll likely see a verification of the earlier breakout above the barrier of $,2900 and the mentioned Feb.5 peak. In other words, such price action would be a positive technical development, which could translate into a comeback to the north (yup, pretty bullish scenario).
Therefore, in my opinion, this is the key area, which should be in the spotlight today because the outcome of the battle fought here will decide the direction of the next very short-term move (interesting opportunity for daytraders).
What could happen if the bulls fail and lose this support?
In this case their situation will look quite grey... literally.
What do I mean by that?
Let’s look at the above 4-hour chart once again.
As you can see a potential move under the mentioned support area, could trigger another pro-declining scenario based on the black channel.
What could this mean in practice?
If the bears start their march below the lower border of this formation (especially if they continue to be supported by sell signals from the CCI and the Stochastic Oscillator) they can slow down around the lower border of the green rising trend channel (currently at around $2,841.50).
Why there?
Not only because it is a very important short-term support (!), but also because in this area the range of the downward movement will be (more or less) equal to the height of the mentioned very short-term black channel (I marked them with grey rectangles on the chart), which may encourage the bears to start taking profits from their short positions.
What does this mean in practice?
The pressure of the sellers will decrease which can be used by their opponents to initiate a return movement towards $2,900.
Long story short, please keep an eye on the above-mentioned key levels and observe the behavior of the market participants. Will the bulls show strength and bounce off the first support zone, activating a return to the north? Or will they fail and allow the bears to go below the lower line of the black channel and start a pro-fall scenario towards the lower border of the green channel? These are the most important questions at the moment, which will decide which of the scenarios will be played out today.
Summing up, gold bulls hit a fresh all-time peak, but then let their opponents to trigger a pullback, which took the price to the previously broken upper line of the green rising trend channel. If the bears successfully broke below it, we’ll see further deterioration and a test of the next supports.
Have a profitable day and see you tomorrow.
Anna Radomska