Pullback May Be Complete

Today’s behavior shows improving demand for gold and possibly the completion of another test of the lower uptrend line across the bottom of a developing bull pennant pattern. Therefore, the short-term pullback is likely complete. A daily close above the 20-Day MA will confirm strength indicated by the reclaim of the 20-Day line.

Moreover, the day is set to end with a potentially bullish hammer candlestick pattern. Although it is not distinct at the bottom of a downtrend, it does provide another piece of bullish evidence. Also, the one-day pattern, which indicates an intraday bullish reversal, can be used to alert a short-term bullish indication on a rise above the high for the day, currently at $3,352.

Potential Bull Pennant Breakout

It is important to understand however, that a hammer breakout would be happening inside a five-day price range, which may impact the response. On Wednesday, gold triggered an upside breakout of a 16-day relatively tight price range and reached a new high for the range at $3,377. The breakout failed to follow through and led to the drop to a six-day low of $3,310 today.

That high was a three-week high. So, a breakout above $3,377 will confirm a multi-week bull breakout. Of course, this would be a bullish sign and put gold in site of the top line at the top of the pennant pattern. That could lead to the pennant triggering an upside-breakout, or a consolidation of some degree first.

Weekly Trend Improves

With Wednesday’s rally a higher weekly high was established, and a higher low will be completed today. This is the second week for the pattern, and it shows improving demand. Although a break above the top trendline triggers the pennant, a more significant signal would be above the lower swing high at $3,451. An initial upside target is at $3,578, indicated by a rising ABCD pattern.

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