Last Friday I mentioned that it’s not a good time to be bullish gold. The market had just closed below the 1215 key level and looked ready to retest 1200.
In fact, that’s exactly what I wrote in Sunday’s forecast:
The most likely scenario, in my opinion, is a decline to channel support near 1200. A daily close below that would open up the October lows at 1180 followed by the year-to-date low at 1160.
Sellers didn’t waste any time taking the market down to the 1200 handle. Monday’s session closed right on it (1200.11 to be exact), and gold has been bouncing around above it ever since.
The last 48 hours of price action are exactly what you want to see if you’re bearish. The slight bid at 1200 confirms that market participants are paying attention to this ascending channel.
Furthermore, the lack of a meaningful bid at 1200 suggests a breakdown isn’t far away. That’s just my opinion of course.
You may recall the last few lines of Friday’s post. I wrote something that probably grabbed your attention.
In case you missed it, here’s what I wrote:
I’ll be keeping a close eye on gold as the price action within this channel unfolds. If the market treats this as a continuation pattern, the objective would be, well, a very long way down.
So how far down is “a very long way”?
Let’s take a look.
But before I show this I want to make one thing very clear:
This is all theory and speculation at the moment. Measured objectives like the one you’re about to see can be helpful. However, they never come with a guarantee.
With that out of the way, let’s do some measuring.
If the market treats this latest consolidation as a bearish flag pattern, the measured objective could be as low as the 2015 low of 1045.
That assumes two things:
- The April 2018 high is the start of the flagpole
- The October 2018 high is the top of the flag pattern
If either one of those is incorrect, then our 1045 figure will need to be adjusted.
For example, if the flagpole began at the June 2018 high instead, then the objective is closer to 1095.
Either way, it’s a long way down.
Keep in mind that everything above rests on the idea that the channel below is a continuation pattern. If it isn’t, you can forget everything you just read.
As for now, sellers need to force a daily close below channel support near 1200. Until then gold is susceptible to bounces that could reach back to new resistance at 1215.
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A daily close below channel support near 1200 would expose the October lows at 1180 followed by the year-to-date low at 1160.
Alternatively, a close back above 1215 would signal that buyers aren’t finished carving this channel. It would also open the door to resistance at 1235.
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Important: I use New York close charts so that each day closes at 5 pm EST.
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