Breakout Pressure Builds Near Triangle Apex
As gold moves closer to the apex of a symmetrical triangle the chance for a breakout and spike in momentum increases. Tuesday’s price action resulted in a low volatility inside day pattern that held support near the uptrend line, which also occurred on Monday. Key near-term resistance is marked by an uptrend line and a downtrend line that cross around June 11. The 200-day moving average at $4,418 aligns near the uptrend line and the 20-day moving average at $4,580 is near the downtrend line. Those four indicators suggest that a breakout may be getting close.
Repeated Support Tests at Key Long-Term Level
This is the second time in several months that support is being tested near the 200-day moving average. The last was with the spike low of $4,098 in March. It is interesting to see the obvious bullish response once the indicator was reached. There was also a bullish response following the latest test with Thursday’s low of $4,366. However, it has not been as convincing so far. This suggests that an enthusiastic reaction may be delayed.
Tight Range Behavior Builds Underlying Demand
Nonetheless, as gold has been trading in a narrow range, it builds demand in preparation for the decisive move. It has had a chance recently to go low and has not done so. Instead, support is being seen again near the uptrend line and 200-day moving average. This is bullish behavior that needs a confirmation signal. That confirmation indicating that buyers are stepping into the market would next occur on a rally above the lower swing high of $4,595 from Friday.
Breakout Triggers and First Resistance Cluster
A bullish breakout of the downtrend line and 20-day moving average will have also been triggered by then. That would leave resistance near the 50-day moving average at $4,634. Once reclaimed, an initial bullish trend reversal will be confirmed. The lower swing high at $4,774 and 100-day moving average at $4,802 target zone follows.
Weekly Structure Points to Larger Move
The weekly chart may clarify the recent low volatility environment. Last week completed a potentially bullish hammer candlestick pattern with a high of $4,595. A decisive breakout above that level would signal a bullish reversal on the larger time frame to go along with a trendline break confirmation.
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