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Stops at 200% Extended Target
Thursday’s high completed a 200% extended target for a large rising ABCD pattern that begins from the August 2018 swing low. That target is joined by the 261.8% extended retracement of the multi-year bearish correction that began from the August 2011 peak at $3,355. Therefore, a decline below $3,284 is a sign of weakness and could lead to a deeper pullback to test prior resistance as support.
Key initial price levels start with the prior high of $3,246 along with Wednesday’s low of $3,239. Then, there is the inside day from Tuesday with a low of $3,208. A bull breakout of that day led to the sharp bullish upside continuation run on Wednesday. Therefore, it may hold significance on the way down as well, if it is approached.
Multiple Bullish Signs
This week’s upside continuation in the price of gold followed a long bullish engulfing pattern that was completed last week. It showed aggressive buying and a continuation of the long-term bull trend. Moreover, the strong advance triggered breakouts of two rising parallel trend channels, further indicating that demand was increasing. The top line of the blue channel should also be watched for signs of support during a deeper pullback, if it occurs.
ABCD Pattern Points to $3,382
An initial target from a rising ABCD pattern has not yet been reached and it therefore identifies the next higher potential target at $3,3,83. Higher up is the 161.8% extended target for a larger rising ABCD pattern (not shown). Then, a little higher is $3,454. That price area is the estimated target for a small bull flag defined by the two narrow range days of consolidation from Monday and Tuesday. An intraday chart (not shown) provides a clearer view of the bull flag pattern.
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