Bullish Above $3,346 to $3,366

An attempt to test support around the lower boundary line of the pennant occurred today. But the day’s low didn’t quite reach it. If the pennant boundaries are maintained, then a rally from the lower area of the pennant could lead to an upside breakout of the pattern. Given the structure of the pennant, an upside breakout could trigger on the next rally, or resistance is seen and followed by a pullback first. A breakout above Tuesday’s high of $3,346 would put natural gas back above the 20-Day MA, as well as the 50-Day line. But a bullish reversal will not be indicated until there is a rise above the recent lower swing high at $3,366.

Upside Pennant Breakout Above $3,451

Although an initial pennant breakout signal will occur on a rally above the top boundary line, the recent swing high of $3,451 should provide a more reliable price level as a swing high will be broken. Gold has been consolidating for several months near the highs of the long-term uptrend. Consolidation has occurred in a relatively bullish position, primarily retaining support above the 38.2% Fibonacci retracement level.

Notice that the pullback low of the pennant at $2,121 in May found support around the 38.2% level, along with the 50-Day MA. And it has not been approached again since then. This shows underlying buying strength being maintained, along with a bullish trend structure.

Bearish Below $3,247

Regardless of the potential for an eventual upside pennant breakout, a drop below last week’s swing low of $3,243 will show weaking and a breakdown of the pennant. That would put gold in a position to retest support around the 38.2% retracement and possibly fall through it to the 50% retracement level at $3,041, if not lower.

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