Falling Channel: After starting December with a sharp bullish swing from 1142.83 to 1238.25, gold has been sliding in a falling channel as we can see in the 4H chart below.
Breakout: Last week, price found support just above 1170 but an initial attempt failed to break the channel resistance and price held below 1200. This week, price held above 1180 for another attempt which succeeded in breaking above the falling channel resistance, the 1200 handle, and the cluster of 200-, 100-, and 50-period simple moving averages (SMAs). This breakout is a bullish sign within the mode of consolidation.
Pullback: Gold found sellers when it hit 1210. It has been pulling back during the 12/31 session. The RSI did not tag 70, so there is no bullish momentum, although it has shown loss of bearish momentum as it pushed above 60 a couple of times. Now, if gold price can hold above 1190, this week’s rising speedline and the 50-period SMA, it can confirm the bullish breakout, and at least open up the 1220 handle.
The daily chart will show resistance around 1220.
A break below 1190 invalidates this week’s bullish signal.
At the Crossroad: The daily chart shows that Gold is at the crossroad pinned between a falling trendline that comes down from July’s high around 1345, and above a rising speedline from the November- and the 2014-low of 1130.
1220 Resistance: The RSI is still below 60, showing maintenance of the prevailing bearish momentum. Now, at 1220, price will likely challenge the falling trendline again, The 100-day SMA also resides here. We can also see a support/resistance pivot around 1220.
A break above 1220 will thus open up a bullish correction outlook for the medium-term. It would confirm that gold has shifted from a bearish trend to a sideways and slightly bullish one. In fact price action since November have already been a reflection of this shift.
Bullish Targets: A break above 1220 would first open up the 1238-40 high, and then the 1250-1255 high from October. The 200-day SMA is also near 1255.
Pullback: Meanwhile, price should start finding support above 1190, and even 1200. If 1200 starts to act as support, we can be more confidence of the bullish correction scenario.
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