Six Trend Continuation Patterns on Gold in a Row is Too Much?

Trading on Gold in November and December should be shown as an example of a perfect trend. What we had there was a nice downswing paused by well-proportioned corrections (blue lines), where we had flags, wedges and pennants. First five, resulted in a trend continuation. The last one, which was present before Christmas, seems to have been denied and resulted in a trend reversal.

This creates a false pattern opportunity (pennant denial), which can result in a stronger upswing. This bullish view is in the same time supported by the fact that price broke the down trendline (red). Is this reversal definite? Well, so far – no. What we are missing here is the close of the daily candlestick above the trendline. This attack can still result in being a false breakout, if sellers will manage to retrace this morning optimism. They made the first step for that when they draw the long head on the previous H4 candle. This breakout is happening but is under a heavy pressure right now.

So now, the best thing to do is just patiently wait for the end of the day. When looking on the gold in the long term, is this area a good place to stop the recent downtrend? To be honest with You, we expected that the fall will be a little bit deeper. 40 USD/oz lower from now, around the psychological barrier on 1100 USD/oz, we have a good looking potential support created by the crossing of the long-term uptrend line (from 2005) and a mid-term line which was connecting lower highs (2013-2015) (grey area). As always market will verify our scenario but it would be nice to see how the price would behave there.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis