Rallies Head into Resistance
A rally into resistance will occur within a developing downtrend. Therefore, there continues to be a good chance that lower price targets are eventually tested during this correction. The initial lower target is the completion of a falling ABCD at 2,252. If last week’s low of 2,287 is broken to the downside, this next target comes on deck. But there is a more significant price target zone underneath there. It has greater significance because there are multiple indicators pointing to the same price area. That price zone is around the previous breakout area of 2,195. It is included with a price zone that begins around 2,215.
Weekly Bearish Pattern
An uptrend line provides the maximum likely retracement as it resides at the lower end of a rising parallel trend channel. Gold was rejected around resistance at the top of the channel with last Friday’s high of 2,388 (C). Also, the weekly chart ended last week with a bearish shooting star candlestick pattern. It had a top tail and closed near the lows of the week. A drop through last week’s low will trigger that bearish candle. Until then, it remains a possibility.
Bullish Reversal Not Seen Until 2,388 is Exceeded
Given the current price structure near the top of the trend, gold would not be clearly showing strength that may be sustainable until there is a decisive advance above last Friday’s 2,388 high. Until then, the developing downtrend rules. Another possibility is that last week’s low continues to hold and that gold eventually strengthens to provide a new bullish signal. Or it falls lower but quickly recovers to close above last week’s low.
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