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Possible Double Top Forms
Today’s price action will leave a small possible double top. The neckline and breakdown level were at Tuesday’s low of $2,864. However, that price area is currently the next potential support level. Another bearish piece of evidence from today is that it is a key reversal day that generated the second top of a possible double top pattern. Once the bearish evidence starts to stack up, the potential for a bearish correction strengthens.
Weekly Chart is Bearish
Moreover, on the weekly chart, gold is set to complete a bearish shooting star candlestick pattern this week. Therefore, a bearish weekly reversal signal will be triggered on a drop below this week’s low of $2,853. That would put gold in a position to test the 20-Day MA, now at $2,817. Notice that since the 20-Day line was reclaimed in early-January, the price of gold has stayed above the line. The line has not been tested as support since then.
Certainly, it is likely to represent support during the current bearish correction, if it does continue. If not, the most recent new high breakout level is at $2,790 and support may be seen around that price area. There is also monthly support a little lower at $2,772. Those two price levels can be considered as a potential support range from $2,790 to $2,772.
Test of Support at 20-Day MA Possible
Given current price patterns, including a bullish monthly breakout that triggered this month, a bearish correction should not negate the longer bullish pattern unless there is a drop below this month’s low of 2,772. Although the month is not yet complete, that low is also a weekly low and a drop below it is bearish on its own. However, for the intermediate bullish view to be retained the 20-Day MA should show support and lead to a bullish reversal.
For a look at all of today’s economic events, check out our economic calendar.
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