Price Rejects at 20 Day Moving Average – Bearish
The 20-day moving average has recently shown dynamic support for an uptrend, but it was successfully tested as a resistance line today as gold prices were rejected to the downside around this line. The same can be said about the relationship with the internal uptrend line. Previously, it was showing support for the uptrend, but today it has turned into resistance territory. This is bearish price action commonly seen during the development of a downtrend.
Friday's plunge may be a sign
Last Friday's sharp one-day bearish engulfing reversal day indicates aggressive selling and mimics the broad range red candlestick on November 6th. This occurred amid an accelerating decline from a record high of 2,790. Last week's high was a low swing high compared to all-time highs, so it may have been a warning sign that a bearish continuation could be coming. If the bears maintain control, the November low will be at $2,537, with the risk of not sustaining support.
Falling ABCD pattern formation
A bearish pattern that could develop is a descending ABCD pattern. This is just a way to calculate two consecutive measuring hands connected by a pullback. The first target of the pattern occurs when the price change seen in the CD leg of the pattern matches the change in the first AB leg. The first target is where there is symmetry in price between the two swings. Extended targets can also be calculated and are based on Fibonacci and other ratios. Nevertheless, the analysis can suggest potential targets, but ideally there is a confluence with other indicators that indicate similar price targets.
Calculations for the purple ABCD pattern on the chart show a potential target of 2,470. This level is also identified in several other ways, thus reinforcing it as a goal. The Fibonacci ratio analysis shows a 61.8% retracement at 2,473, but there are also two trendlines nearby, one up and one down. Additionally, resistance from July's temporary swing high is at 2,484.
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