Chart Analysis: Gold’s Bullish Reversal Signals Resumption of Uptrend

Following a successful test of support around the 20-Day MA (purple) yesterday, gold triggers a bullish reversal Tuesday on an inside day breakout above 2,034. A daily close above that price level will confirm the breakout, while a rise above the four-day high of 2,048 is a stronger confirmation of the bullish reversal following a retracement to support. Moreover, 2,048 is also a weekly high and a breakout above it will provide weekly bullish confirmation of strength. If gold doesn’t fall below the retracement low at last Friday’s low of 2,016, it is anticipated to continue to make its way higher.

20-Day MA Tested as Support at 2,016

Gold successfully tested the 20-Day line as support over three days, including today. The subsequent bullish trigger confirms support of the moving average thereby sending a signal that gold recognizes the moving average. Therefore, we can keep an eye on it for dynamic support of the uptrend going forward. This is the first successful test of support at the 20-Day MA since gold got back above the line on October 13.

A failed test of support at the line failed on November 8. However, notice the relationship of the price of gold with the 50-Day MA (orange). It looks at a longer period to define dynamic support or resistance of the trend and has already proven itself as support twice since gold rose back above it in on October 13.

Two Initial Resistance Zones

If gold keeps rising it initially heads towards two possible resistance zones. The first being from around 2,052 to 2,058, and the second identified from 2,070 to 2,082. A key price level is represented by the high of the second range at 2,082, as it is a swing high from May of this year. Not shown today is the completion of a rising ABCD pattern at 2,091. It begins point A at the recent swing low of 1,973.

Weekly Bullish Reversal on Rise Above 2,048

As noted above, a decisive breakout above last week’s high of 2,048 triggers a weekly bullish reversal. A and a daily close above it will confirm strength of the breakout. Given that a weekly signal is more significant than a daily signal, once gold rises above 2,048 it has the potential to accelerate its advance as buyers should get more aggressive.

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