Selling Pressure Intensifies
Although the next lower target is the 38.2% Fibonacci retracement at $2,813 the decisiveness of the bears will likely lead to a test of lower price. The prior trend high of $2,790 is an obvious target but if selling pressure is retained that price level may be broken. Lower price levels are identified by at least two indicators as possible support zone.
The first is the 50-Day MA at $2,769, which has converged with the 50% retracement, also at $2,769. Since the next lower uptrend line is rising toward the 50% retracement zone, by the time gold approaches that potential support zone, the trendline may also need to be considered. This is assuming there is not a failure of the trendline to remain support.
Monthly Bearish Shooting Star for February
The longer time frame pattern is a concern given that the month of February ends today. Gold is set to complete the month with a potentially bearish shooting star candlestick pattern. However, it is not bearish until a breakdown triggers thereby confirming the pattern. Nonetheless, it shows the month ending in a relatively weak position relative to the month’s trading range.
The low for the month is $2,772, near where the 50-Day line is now. This will leave gold in a precarious position where a monthly breakdown could be triggered. Nonetheless, follow-through will be key. If the monthly bearish shooting start triggers to the downside, it opens the possibility of an eventual test of prior monthly resistance at $2,726 from December.
20-Day MA Marks Key Potential Resistance
Interim rallies can be watched for signs of resistance that may develop into bearish intraday reversal patterns. The 20-Day MA is an obvious line to be tested as resistance and it is now at $2,896. It can be combined with Tuesday low of $2,888 for a potential resistance zone.
