Gold broke out of a small bull pennant continuation pattern on Wednesday and then took off, rising to a new record high of $3,341, at the time of this writing. It continues to trade near the highs of the day and may yet go higher before the end of the trading session. The pennant is a small symmetrical triangle consolidation pattern that can best be seen on an intraday chart (not shown).
It was established above support of a top channel line that previously represented resistance and was proceeded by a sharp three-day advance that generates the pole for the pennant pattern. Bullish implications of the breakout are supported by last week’s breakouts from two rising parallel trend channels. The larger channel is shown with purple lines and the shorter in blue.
Bullish Momentum Increases
The acceleration in the angle of ascent for gold is a sign that it is likely getting closer to a potentially significant high. Gold may be in a runaway move that could continue to surprise on the upside. Three potential targets where resistance might have been seen were exceeded today, and gold looks to be on its way to the next higher target at $3,355.
The rising ABCD pattern shown on the chart has a 127.2% extended target at $3,383. The initial 100% target at $3,291 was exceeded today. Targets only show potential areas of interest where resistance may be seen, or a bullish continuation signaled on a breakout through the price area.
Multiple Bullish Indications
This week’s advance follows a long bullish engulfing pattern from last week as seen in the weekly chart (not shown). It reflected aggressive buying and occurred following the channel breakouts, which also indicated more aggressive buying. This means that higher targets might also be considered, Specifically, the estimated target from the pennant pattern assuming it follows through to completion is approximately $3,454.
Again, this doesn’t mean that the target will be reached in a reasonable time, only that it could be. The price level is roughly around 5% above current prices. The projection estimates that the price appreciation seen in the sharp portion of the rally before the pennant formed, may be repeated following an upside breakout. So far, it looks like gold is off to a good start.
Source: Fxempire
