Close below 2,605 confirms bearish signal
A daily close below the 2,605 support level will confirm today’s bearish signal and put gold on course to test lower support levels before the correction is complete. Note the parallel descending trend channel on the chart. Recently there was an attempted breakout above the upper channel line, but it failed after a few days when gold fell back below the line last Friday.
Also, recent attempts to recover the 20-day and 50-day MAs have failed. Resistance was seen around the 20-day line yesterday, after gold traded above it six days earlier. The 20-day line fell below the 50-day line on November 26 and has not risen above it. These are all bearish signals that now take on greater significance.
Decline May Test Support Around 2,537 Swing Low
It seems like there’s a good chance the 2,537 swing low will be retested as support and lower prices could certainly be hit as well. In general, an eventual hit of the opposite trendline is possible once price is rejected on one side of a channel and starts moving in the other direction. The weekly chart held the clue for this decline as today triggered a bearish weekly shooting star candlestick pattern from last week. And it represents a failure of the bull’s previous breakout, mentioned above. A failed pattern can lead to sharp movements.
Lower potential support zone around 2,473
Below 2,537 is a 61.8% Fibonacci retracement level at 2,473, which appears to mark the next lower potential support level for gold. A descending ABCD pattern also comes close to that price level at 2,475. It would also be a good idea to watch for signs of support around the next lower trendlines, which are around the Fibonacci retracement level.
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