Gold closed yesterday’s session above the barrier of $2,200 for the first time ever. Will we see a fresh peak?
Technical Picture of Gold
Looking at the daily chart, we see that two unsuccessful attempts to close the day above the barrier of $2,200 didn't discourage buyers.
Although the price moved lower after the market open, the upper border of Tuesday’s green gap ($2,176.40-$2,195) stopped the sellers and triggered a rebound that took the yellow metal above the key level.
Thanks to the bulls’ attack, gold hit an intraday high of 2,218.30, approaching the previous peak. Despite a little pullback before the end of the day, gold closed the day above the barrier of $2,200.
Is this a bullish development? Yes.
But…
Yup, there is one but and it is called the volume. As you see, yesterday’s move materialized on visibly lower volume, which raises some doubts about the bulls’ strength.
Nevertheless, the Stochastic Oscillator generated a buy signal, giving them another reason to fight for higher prices.
Will we see further improvement?
Let’s take a look at the charts below.
From today’s point of view, we see that gold futures broke above the upper border of the green rising trend channel, which resulted also in a breakout above the 78.6% Fibonacci retracement and opened the way to the Mar.20 peak.
Although the bears tried to push the price lower (verification of the earlier breakout), the upper line of the channel withstood the selling pressure and continues to serve as the nearest support. Therefore, as long as it remains in the cards, further improvement and a test of the recent peak are likely.
Nevertheless, please keep in mind that the CCI and Stochastic Oscillator moved to their overbought areas, suggesting that sell signals may be just around the corner. If the indicators generate them and the bulls fail to break above the Mar. high, we could see a reversal and a decline to at least the barrier of $2,200 in the coming day(s).
What could happen if it is broken?
In this case, the way to $2,189.75 (the bottom of the big white candle that brought the breakout above the green channel) will likely be open. If the bulls fail here, the next stop could be the lower border of the green channel (currently at around $2,181.
Summing up, gold closed Wednesday’s session above the barrier of $2,200, which, together with the current situation on the 4-hour chart, suggests that the bulls have an open way to attack the Mar. peak. Nevertheless, yesterday’s disappointing volume and the current position of the very short-term indicators suggest that even if the buyers attack once again, the space for gains may be limited, and reversal could be just around the corner.
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See you tomorrow.
Anna Radomska