Gold continues to trade in a consolidation range at a key potential pivot zone with a high of 2,041. For around six days it has been trading in a range pushing up against resistance marked by several indicators. A combination of the 8-Day, 20-Day and 50-Day moving averages are within the range along with a downtrend and uptrend line. Twice recently daily support was seen at the 20-Day line (purple). That’s a change from previous price action where trading occurred both above and below the line over four days last week.
Bull Triggered on Move Above 2,041
Nonetheless, a decisive breakout above last week’s high of 2,041 is needed to trigger greater enthusiasm from the bulls. If that happens before a drop below 2,016 occurs, gold should be ready to continue to trend higher to eventually test prior record highs. The 2,016 level is being used to mark the low of consolidation.
Looming Large Symmetrical Triangle Breakout
Over the past several months gold has formed a large symmetrical triangle consolidation pattern with a breakout triggered by a rally above 2,041. That should give it a chance to see a clear increase in upward momentum once a bullish breakout is triggered. The pattern has formed above nearby support represented by the 200-Day MA (blue), which is evidence for an eventual upside resolution. Since gold rallied back above the 200-Day line on October 18 it has successfully tested the 200-Day line three times as support and each time it was rejected to the upside. It should provide a strong base for gold to launch from.
Weekly Breakout Support Higher Prices
Recent weekly price action is also supportive of an upside resolution to the triangle. Two weeks ago, an upside breakout of a hammer candlestick pattern triggered a bullish reversal. It was confirmed by last week’s close above the prior week’s high, and a close in the top third of the week’s range. This means that the long-term time frame represented by the weekly chart has only recently triggered a bullish signal. Therefore, it should be the beginning of a new portion of the larger rising trend.
Source: FXempire
