Gold trading at daily resistance after a higher weekly low

21 September, 2015

Gold, Weekly

Gold created a higher low in the weekly chart at levels where the downside was getting limited. I wrote in the previous report that after moving lower for three weeks it is not likely that price will have another significant down move and added that the Fed’s not expected to hike rates (only 28% probability for September rate hike). And furthermore, gold was trading relatively near levels that attracted buyers the last time. Now, whenever a market can’t move lower the probabilities of it moving up are higher. Gold rallied over the last three days with the markets anticipating the Fed’s decision to leave the rates untouched.

After last week’s close was decisively higher than the previous week’s high we now have a higher pivotal low in place. This is an early indication that the market might be attempting to rally from here. In terms of the long term down trend the price of gold has lately been close to the lower end of its likely range. Together with the higher low this suggests that we might see a corrective move inside the long term downtrend. For this to happen we should see some base building first. This would mean price reacting lower and testing the support again or creating another higher low. Weekly support and resistance levels are at 1097 and 1170.

Gold, Daily

The price of gold rallied to pivotal resistance between 1134 and 1147. This bracket is fairly close to the upper daily Bollinger bands while Stochastics are in the overbought area. The same goes with the RSI (7) and Money Flow Index (7). The move higher from 1098 support has been strong. Pivotal resistance area was reached with three wide range candles. However, this doesn’t mean that the price can’t correct lower. Price is trading at resistance and we should follow the intraday resolutions to get clues if and when gold starts to roll over. There is some support at 1136, caused by the daily high from Thursday last week. Significant daily support and resistance levels are at 1112 and 1147.

Gold, 240 min

Lack of momentum is not surprising after such a quick move into a significant resistance. This is manifested in a sideways move that has created a small triangular flag formation and indicates that some of the players have cashed their chips after the three day rally. Stochastics is pointing downwards suggesting overbought conditions while price is trading inside a pivotal resistance created on September 1st.  The nearest significant 4h support and resistance levels are at 1123 and 1147.

Conclusion

In the long term (weekly) picture we have early signs of an attempt to move to the upper parts of the channel. The lack of commitment from the Fed to raise rates has helped to create a higher weekly low, which is a significant indication of strength coming into this market and acts as an early indication that the price of gold has scope to move somewhat higher – even up to 1200 – 1232 range. However, before that we should see some bottoming action above the 1097 support. In the daily time frame price is at a resistance that coincides with the upper Bollinger Bands which suggests that the market could correct lower from here. RSI, MFI and Stochastics are right at the overbought area supporting the idea. Intraday support at 1135 holds the price up at the time of writing but if that level breaks the next significant daily support level is in 1098 -1112 bracket. If gold breaks out of the triangle to the upside and manage to move beyond the 1147 resistance, the next likely target range is at 1170 – 1186. 


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