Breakout Attempt Fails at Lower Swing High
Gold pulled back to a four-day low of $4,879 on Thursday, as it struggled to sustain support near the 20-day average. Following a three-day attempt to sustain a breakout above a lower swing high at $5,092, silver relented to downward pressure with sellers taking control. Although, this week’s high of $5,119 extended the advance a little above the lower swing high, it was not sustained with a daily close above the prior high. Gold is set to end today’s session at a four-day low and thereby confirm the switch to short-term bearish.
20-Day Average Under Pressure
Although the 20-day average provides a guide, it has not been clearly defined by the market. Recent volatility put the 20-day average in the middle of recent large price swings. So, it needs to proven still as either support or resistance. What is interesting, is that the 10-day and 20-day averages have converged and identify a similar price level for the same period. Until now, the 10-day average has remained above the 20-day since November. A drop below the 20-day line would indicate further short-term weakness.
Key Support Near 50-Day Average
Today’s low at $4,879 is short-term support and below the 20-day average. Gold has faltered after barely rising above the $5,092 high. This suggests that a period of consolidation may occur. Key support for the bull trend is near the rising 50-day average at $4,611. There is also the recent higher swing low of the bounce at $4,655, that completed an interim low. Another test of support during consolidation would be expected and it would be healthy for the trend.
Upside Targets Toward $5,345
On the upside, if today’s low leads to a higher swing low following an upside breakout above $5,119, higher targets may get hit before the advance completes. There is an upper price zone marked by the confluence of two targets. Both point to $5,345 as a price level of interest. The 78.6% Fibonacci retracement of the recent decline anchors the target, and it is supported by a 100% target for an ABCD pattern.
If you’d like to know more about how to trade gold and silver, please visit our educational area.
