A bullish pattern breakout signal needs to have additional confirmation of strength following the breakout. Gold is already indicating that the hammer breakout is suspect given the relationship to the 20-Day MA. Also, the rise above yesterday’s high was minor and not convincing. It doesn’t show a clear improvement in demand. Further, notice that today’s high of 2,312 found resistance at a top channel line that had been part of a support zone until Monday’s sharp decline.
Tuesday’s Strength Needs Upside Follow Through
Tuesday’s low of 2,291 completed a 50% retracement level of the internal trend. The subsequent bullish hammer candlestick and daily close above the 20-Day line indicated that the retracement in gold may have completed. However, an upside breakout and subsequent additional signs of strength were needed.
The breakout has been triggered but there are not yet additional signs of strength. A daily close today above the 20-Day would be one sign, but minor. Then, another breakout above yesterday’s high followed by a daily close above it will provide additional confirmation.
20-Day MA is Key
Also, on the bearish side, a daily close below the 20-Day is a bearish indication. Further, today’s low of 2,312 could trigger short-term weakening as gold again approaches yesterday’s low of 2,291. If that low is broken to the downside, then a deeper correction is likely. The next lower target would be around the 38.2% Fibonacci retracement of the full swing that began from the February swing low. That price level is at 2,261 and includes the 61.8% retracement of the internal upswing at 2,255.
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