Technical Update: Gold Continues Sliding, Falls Below Key Support
On May 17, we discussed gold breaking below the lower boundary of its 4-month, 70-dollar trading range (trading range – $1,300 to $1,370 in Figure 1 and horizontal trendlines in Figure 2 – GLD shown).
Figure 1. Gold Daily Chart
- After the initial break below the horizontal trading range, gold found support at the trendline connecting the December 2016 & December 2017 lows (support – green trendline; retest – last green arrow).
- Over the next couple of weeks, the commodity staged several attempts to move back within the horizontal range however it halted at two major resistances:
- Its 200 SMA (white line in Figure 2 and blue line in Figure 1).
- The support-turned-resistance horizontal trendlines (lower bright blue and purple trendlines in Figure 2).
- On Friday (June 15), gold moved below the trendline that had served as support in May and June (green trendline).
- This week, the commodity has continued to slide, so far, giving no indications that it will quickly recover and move above its broken support.
Figure 2. GLD Daily Chart
- Gold’s sharp decline on June 15 confirmed the importance of the green trendline. The break below it is deemed significant, at least in the short-term.
- Given the break below the 1.5-year support (green trendline) and the lack of major support levels in the $1,240 – $1,280 range, the target obtained from the trading range breakdown is likely to be met (target – $1,230 obtained by projecting the $70-dollar height of the pattern from the point of the breakdown).
- Short-term bearish as long as the commodity remains below the lower of the green trendline and its 200 SMA (currently at $1,308).
- Neutral with a bullish bias if gold quickly moved back above the green trendline and subsequently above its 200 SMA.
- Short- and long-term bullish above $1,380, as a break above 2016’s high will activate the previously discussed longer-term upward targets.
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