Chart Overview
Today’s analysis focuses on Gold Futures, trading on a daily timeframe. While the market maintains an overall bullish trend within a well-defined ascending channel, a potential head and shoulders pattern could be formed.
There was a big red candle on the Trump victory, which was no surprise as investors looked for riskier investments instead of gold, a safe haven. The key will be figuring out if this is just an initial reaction that will lead to the price action continuing higher or if the market really moves assets more into risky investments, and we will see a reversal from here. Let’s look at the possible H&S.
Key Technical Patterns & Levels
Possible Head and Shoulders Formation
We can see a possible Head and Shoulders pattern taking shape, with the Left Shoulder peaking around $2,707.6, the Head marked at $2,800, and the Right Shoulder potentially forming at the same $2,707.6 level. This is only speculation for now and bulls need to push through the $2,707.6 level to invalidate this possible H&S pattern.
Critical Resistance at $2,707.6
The key level for bulls to watch is $2,707.6. Should prices fail to break through this resistance and complete the potential right shoulder, a downward move comes into play, pointing toward a trend reversal. Conversely, a push past this level would invalidate the pattern and set a bullish target at $2,800, aligned with the peak of the head.
Support from 50-day SMA
The 50-day SMA is holding prices from dropping further. There was support immediately after the Trump victory candle found at this SMA.
Bullish Case
- Upward Channel Continuation: Staying within this ascending is crucial for the bullish trend to remain in tact.
- Break Above $2,707.6: A confirmed break above this level can trigger a rally targeting $2,800, resuming the uptrend and would likely invalidate the H&S formation.
Bear Case
- Reversal Pattern Risk: If the right shoulder forms and prices fall below the neckline, it could signal a broader pullback to $2,600.
- Resistance Stalling: A failed breakout at $2,707.6 could lead to a loss of bullish momentum.
Outlook & Summary
- Short-term (1-2 weeks): Watch for the formation or invalidation of the right shoulder near $2,707.6. Key breakout or reversal signals are expected here.
- Medium-term (1-3 months): Confirmation of either a continuation past $2,707.6 or a breakdown could set the directional bias.
- Long-term (3+ months): Sustained trading above $2,800 would reaffirm bullish control, potentially driving gold to higher highs. Conversely, a confirmed head and shoulders pattern could initiate deeper corrections.
