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Invalidation of the breakouts, candlestick formation, and the volume. What are they saying about the next move?
Technical Picture of Gold
Looking at the medium-term chart, we see that although the sellers invalidated the earlier breakout above the upper border of the blue rising wedge in the week ended on Mar.15, their opponents closed ranks and pushed the price of the yellow metal to a fresh high of $2,225.30 in the previous week.
Despite this improvement, they didn’t manage to hold gained levels, which translated into a correction of the earlier move and another weekly closure below the mentioned blue resistance line.
Thanks to this decline, a doji candlestick with a prolonged upper shadow appeared on the chart, confirming the bears’ involvement in the decline.
What impact did this move have on the short-term chart?
Before we answer this question, let’s recall the quotes from the last article on gold:
(…) gold moved lower yesterday and tested the 2023 peak once again. Despite this downswing, bulls stopped their opponents and triggered a rebound, which left on the chart a red candle with a prolonged lower shadow (another pro-growth hammer).
Yesterday’s small decline materialized on a smaller volume than earlier increase, which suggests that the sellers may lose interest in further attacks.
From today’s point of view, we see that last week's assumption turned out to be correct and translated into another upswing that took gold not only to the red gap formed on Mar.13 (as a reminder, it was the upside target for the buyers about which I wrote in Quick Gold Alert posted on Tuesday), but also to a re-test of the barrier of $2,200.
It turned out to be a very easy challenge for the rushing bulls, who crossed it with ease - just like the previous peak. As a result, the new highest peak of the 21st century has been reached (in line with the assumption from Quick Gold Alert posted on Mar. 13).
As I mentioned earlier, the price reversed and pulled back, invalidating the earlier breakout above the previous peak and the barrier of $2,200, which caused the bears’ attack and closure of the green gap formed on Thursday (seen more clearly on the chart below).
However, despite over 1% loss, the volume that accompanied Friday’s decline was quite small, which resulted in a higher open earlier today.
From this perspective, we see that gold futures formed a green supportive gap ($2,160-$2,167.45), which suggests that further improvement may be just around the corner – especially when we factor in the current position of the 4-hour indicators.
Just take a look at the chart below.
From this closer point of view, we see that the Stochastic Oscillator slipped to its lowest level since Mar.18 (just like the CCI), which suggests that we could see a similar rebound in the coming day(s). If this is the case, and the bulls use the above-mentioned technical developments to their advantage, we could see even a re-test of the barrier of $2,200 once again.
Summing up, although gold bulls failed to hold the price above the barrier of $2,200, the lower volume that accompanied Friday’s session, today’s green supportive gap, and the current situation in the USD Index suggest that another upswing may be just around the corner.