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Advance Completed a 78.6% Retracement
The completion of a 78.6% retracement was reached this week, and it was followed by a one-day bearish reversal signal today. This improves the chance that gold may see at least another leg down in the correction before it is through. There has only been one leg down so far, that ended at $2,833. Although the 20-Day line, which was previously dynamic support, was broken to the downside last Thursday, it followed the breakdown of another trending indicator, an uptrend line.
During the current advance the 20-Day line failed as resistance. However, the rising trendline shows a successful test of resistance around the trendline, which previously marked dynamic support. Might the trendline be tested again as resistance. Certainly, if there is an advance above this week’s high the trendline is a key area to watch for resistance.
Bearish Continuation Will Target $2,813
A bearish continuation of the one-day reversal signal will be indicated on a drop below today’s low of $2,891, as it triggers a bearish continuation. That will put gold in a position to test the next lower target zone, which is around the 38.2% Fibonacci retracement at $2,813. The 38.2% retracement level is joined by the initial target for a falling ABCD pattern (purple) or zig zag pattern, at $2,810.
Since there are two indicators marking a similar price target ($2,813 to $2,810), it becomes more likely to be reached and show signs of support. A deeper bearish retracement following a new trend high in gold, should better prepare to continue to advance if a new high is triggered again. In the short-term the bull trend had gotten extended and due for a rest.
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