Gold – Negative Reversal Spotted in the 4H Chart

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Gold - Negative Reversal Spotted in the 4H Chart

Bearish Trend Still Intact:
Gold has been bearish since the 1344 high in July. This week, gold price (XAU/USD) fell to about 1208 before consolidating. In the 4H chart we can see this bullish correction attempt push to a new high on the week, to 1235, but we saw sellers push price back towards 1220 by the start of the 9/24 session.

In the 4H chart, we can see that price is still below the 200-, 100-, and 50-period simple moving averages (SMAs) and below a couple of falling speed lines. The 4H RSI has also been holding below 60 showing maintenance of the prevailing bearish momentum.

Gold (XAUUSD) 4H Chart 9/23
gold 4h chart 9/23

(click to enlarge)

Negative Reversal:
Another interpretation from the RSI is a bullish divergence, which the market resolved by rallying in the previous session. Now that this bullish divergence is old  news, another RSI signal is provided – the negative reversal. According to RSI guru Andrew Cardwell, if the RSI high is higher, but the corresponding price high is lower (given that the prevailing trend is bearish, and the the RSI is still in bearish territory (below 60, preferably below 50), then there might still be another bearish attempt. Therefore the 1208 low is now in danger of being broken, and price has at least the 1200 handle in sight.

Triangle Support:
When we look at the weekly chart, we can also see a bearish outlook. The moving averages are in bearish alignment, and price is below them. The RSI has tagged below 30 in 2013, and has held below 60 for the most part in 2014, showing maintenance of the bearish momentum in the 2011-2013 decline.

Gold (XAUUSD) Weekly Chart
gold weekly chart 9/23
(click to enlarge)

We can see that price has consolidated in somewhat of a triangle pattern and gold is now threatening to test the triangle, 2013-2014 low around 1180.20.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.