Gold price appears to be forming a bottom since November’s price action. When we look at the daily chart, we note several things.
1) The overall trend since July’s 1345 high is still bearish based on the moving averages and price action.
2) The bearish momentum is still alive with the RSI still holding below 60.
With that said, there is evidence from price action that gold is starting to form a price bottom, or may have put in a bottom for the year at 1130. The basis for this hypothesis is that we are saw 3 bullish engulfing candles form since early November, showing strong buying interest at and just above 1130. Price has been making lower highs and lower lows since July but for the first time, price made a higher high when gold rallied above November’s 1208 high to about 1220.
There is still some upside to 1240, even if the market is to remain neutral-bearish. At 1240, there is a 100-day SMA, and a falling trendline that might invite sellers. However, the bearish outlook at this point might have to be limited to 1150, and at most 1130. Now a break above 1240 might open up a bullish reversal scenario, but for now, let’s maintain the neutral-bearish outlook, with some short-term upside risk.
Silver is in a similar predicament but there are 2 differences.
1) It made a new low before the latest bullish engulfing candle.
2) Price is has not clearly broken above the resistance pivot in November to show ability to make higher high.
If silver breaks above 16.75, it would make that higher high as well as clear the falling trendline from July’s 21.57 high. This would open up at least 17.80 in the very short-term. We might see some sellers here, but at this point, we should start limiting the bearish outlook to the 15-15.50 area in anticipation of a period of consolidation.
For both gold and silver, if the daily RSI reading is able to break above 60, they are more likely to be in consolidation.
Previous Post by Author: Bitcoin and Litecoin Awaiting Congestion Pattern Breakouts