Candlestick formation, gaps and important levels to watch.
In today’s gold price forecast, I decided to share with you my insights from today’s Quick Gold Alert. Have a nice read!
Technical Picture of Gold
The first thing that catches the eye on the above chart is Monday’s higher open, which resulted in a big gap ($2,712.20-$2,743) that took gold futures slightly above the previously broken upper border of the medium-term orange rising trend channel.
Despite this positive development, gold bulls didn’t manage to hold the price above this important line, which translated into a reversal. As you can see, an invalidation of the earlier tiny breakout above the orange channel lured the sellers to the trading floor, and the price slipped quite quickly under the lower line of the gap that had started the day.
This strong sign of the bulls’ weakness triggered further deterioration in the following hours, and the futures finished the day not only under the mentioned support but also well below the barrier of $2,700 and the opening price of Friday’s white candlestick.
Thanks to this price action, the sellers gained a valuable ally – a big bearish engulfing candlestick pattern, which reinforced the resistance zone created by the upper border of the orange channel and the resistances marked on the 4-hour chart below.
As you see on the above chart, the fourth resistance area (marked with the red ellipse with 4) created by the early Nov. peaks, a psychologically important level of $2,750 and the 78.6% Fibonacci retracement (based on the entire Oct.30-Nov.14 downward move together with the above-mentioned upper line of the orange trend channel and the sell signals generated by the 4-hours indicators successfully stopped the bulls and further improvement.
At this point, it’s worth recalling Friday’s alert:
(…) in my opinion, it is worth keeping in mind that (…) the current position of the 4-hour indicators (bearish divergences between their values and the price of the futures) can lure gold bears and trigger a correction of the recent upward move in the very near future.
(…) the first target for the sellers will be the barrier of $2,700. (…)
However, if the bulls fail here, the bears will likely test the strength of yesterday’s green supportive gap ($2,651.70-$2,653.40) or even the 38.2% Fibonacci retracement (based on the entire recent upward move) at around $2,646 in the following days.
From today’s point of view, we see that the situation developed in line with Friday’s assumptions and gold futures tested the mentioned Thursday’s gap during yesterday’s session.
Despite this drop, it withstood the selling pressure, and the futures finished the day above it. Nevertheless, the above-mentioned big bearish engulfing formation (marked on the daily chart) translated into a lower Tuesday’s open, creating a small red gap ($2,650.80-$2,653.10) on the daily chart.
What can we expect next?
Taking into account yesterday’s pro-declining candlestick formation and today’s pro-bearish red gap, it seems that another downswing could be just around the corner.
Nevertheless, the current position of the 4-hour indicators suggests that the space for declines (in the very short term) may be limited.
What does it mean?
In my opinion, gold futures will likely test the green support zone (marked on the 4-hour chart) created by the previously broken mid-Nov. peaks, Nov.19 & Nov.20 lows and the 61.8% Fibonacci retracement (based on the entire recent upward move) at around $2,620 in the very near future.
However, if the bulls fail here, the way to the barrier of $2,600 could be open.
Summing up, gold futures moved sharply lower on Monday, which resulted in an invalidation of the tiny breakout above the upper line of the orange trend channel and the closure of the gap that started the day. These negative developments translated into a lower Tuesday’s open, creating a pro-declining gap. Nevertheless, the current position of the 4-hour indicators suggests that the space for declines may be limited, and correction of the recent declines should not surprise us in the coming day(s). Therefore, I believe that keeping an eye on the nearest green supportive zone could be the key to further profitable trades. Stay tuned.
Have a profitable day and see you tomorrow.
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Anna Radomska