Gold and Silver Signal Bearish Continuation with Flag Breakouts

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Gold and Silver Signal Bearish Continuation with Flag Breakouts

The month of November was one where the USD was in consolidation and pared its gains. Subsequently gold and silver rallied from their respective lows on the year. However, as we get ready for December, both gold and silver have signaled bearish continuation. Let’s take a look at the technical developments of these previous metals.

Gold (XAU/USD) 12/1 Daily Chart
gold daily chart 12/1
(click to enlarge)

The daily chart shows gold is a persistent downtrend even with Novembers rally from 1130 to 1207.
1) The 200-, 100-, and 50-day SMAs are sloping down and are in bearish alignment.
2) Price tested the 50-day SMA and respected it as resistance, holding below all of mentioned SMAs.
3) The RSI came held under 60 and is breaking below 40, showing persistence of bearish momentum.
4) The market has been making lower highs and lower lows, staying below a pair of key falling trendlines.
5) At the end of last week, price fell sharply to break below November’s flag or pennant consolidation pattern, signaling bearish continuation.

Opening Gap: In many retail trading charts, December is starting with a gap to the downside. We can anticipate some pullback in the short-term, but as soon as the gap closes, watch out for sellers.

Levels: Another level we should monitor for sellers is the 1180-1185 area. If gold is indeed back in the bearish mode, we should see sellers in this support/resistance pivot area. To the downside, we have the 1130 in sight, and the 1100 psychological handle as the next possible target in the short to medium term.

Silver (XAG/USD) Daily Chart 12/1
silver daily chart 12/1
(click to enlarge)

Much of the technical conditions in silver’s daily chart are similar to that in gold’s daily chart, specifically involving the moving averages, the RSI, a falling trendline, and the break below November’s correction pattern. It is also starting the week with a downwards gap.

A different is that silver has broken below the November and 2014-low and below a psychological level of 15.00 to begin the week.

Now, on a pullback, we should first anticipate sellers at the close of the gap around 15.50. But if the pullback extends, we should expect sellers near a support/resistance pivot area around 16.00 if silver is indeed in a bearish mode.

The bearish outlook has room to fall until 10.00, but watch out for support around 14.00 in the short-term, and around 11.80-12.00, common lows in 2009, for the medium-term target.

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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.