Sellers Take Control
There are several reasons that selling pressure could accelerate following a drop below today’s low. There is a bear pennant pattern that triggered yesterday, showing a potential target around $3,027. That decline put the price of gold back into a rising trend channel (blue) pattern. Once that happens there is the potential to eventually test the other side of the channel.
This is particularly a risk when the return into the channel’s price range follows a failed bullish breakout, which is the case with gold. Then, there is the failure to retain support at the 20-Day MA, which is now in process.
Weekly Bearish Confirmation
The longer-term weekly pattern is also bearish as a reversal of a weekly shooting star candlestick pattern that formed last week triggered this week. A weekly closing today below last week’s low of $2,260 will confirm the weekly signal. Since the lower target for gold looks to be around the pennant projection of $3,027, higher price zones may not hold as support.
Next Potential Support at $3,168
Two areas of potential support stand out. The first is at the confluence of a prior trend high of $3,168 and the 61.8% Fibonacci retracement at $3,164. Notice that the top channel line (purple) for a larger rising trend channel is currently around that price area. Then, there is the 50-Day MA at $3,086 and the 78.6% retracement level at $3,073. That price zone is near the lower trendline for the blue rising channel.
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