Second Sharp Selloff Since Top

Judging by the bearish reaction following the new trend high of 3.56 last Friday, resistance was seen near the top trendline of a parallel trend channel. The channel shows price symmetry, which can be seen with the rising dashed center line that is drawn up the middle of the channel. Once one end of the symmetrical pattern is hit and price reverses, the other end of the pattern becomes a target.

Given the decisive nature of today’s drop, it looks like there is a good chance that lower targets may be tested. For gold, that would be indicated on a test of support around the lower channel line and 20-Day MA. Since the 20-Day MA (purple), another trend indicator, has converged with the bottom channel line, it can be used as a proxy for the line. Currently, it is at 2.95.

Interim Support Levels

Nonetheless, there are other price areas to watch on the way down. Either may see signs of support. Next in line is the 3.16 swing high from June. The 3.02 swing high follows a little lower. It is a potentially significant price area as it signaled the recent bull breakout on November 20. A successful test of support around the 20-Day MA would realign the gold trend and keep it at a more sustainable slope. It is also interesting to note that potential support from the top downtrend line also converges around the 20-Day MA price level.

Bull Triangle Breakout is Dominant Pattern

A deeper retracement from last week’s 3.45 peak would be healthy for the market and help squeeze out some speculation. On November 20 natural gas broke out of a large bullish symmetrical triangle pattern. As with any breakout, a pullback to test prior resistance as support is normal behavior. Once a counter-trend decline completes, the larger and more powerful bullish pattern should be ready to proceed.

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