Continuing our series of recent posts on Gold and how to spread bet gold, we saw a new all time high intra-day yesterday at $1266.50 (August contract). However, the market was unable to hold on to those highs and sold off for the rest of the day, forming a bearish engulfing pattern. As the name suggests, this is a bearish pattern and a reversal signal. However, it may not yet be the end of the uptrend.
In the most recent post of our series about spread betting Gold, we wrote that we would be looking for another close on Monday or early in the week above prior all time highs and resistance around $1255 to confirm the bullish momentum and the breakout higher from the ascending triangle. We did not get this yesterday and the market in fact closed below prior resistance at $1240.7.
What’s interesting to note is that the lows for the day at $1231.60 were right on the lower support line from the previously mentioned ascending triangle. If this support line can hold then we may yet see a move back up towards the top of the pattern and new all time highs. Conversely, a break through this support line will likely see the market push lower towards support around the $1215-1217 level where we had a bullish engulfing pattern confirming that support area last week. Until we get a close below that bullish engulfing pattern then that pattern is still holding and may push the market higher.
Further below that there is also support at $1200. As of now, a break down through that support would suggest that the uptrend is over, but as long as $1200 holds then the short and long term trends are still up, and these 2 factors are the most important factors of all. For now we’ll have to wait and see what happens.