Bounce to test pre-support as a resistor
Following last week's new record high of $2,956, gold fell below the previous week's weekly low, causing an upward trend line and a breakdown of 20-day MA. Then last Friday we saw support at a pullback low of $2,833. The next rally was a three-day advance to Wednesday's highest $2,930. However, this advancement could be a countertrend rally to test previous support areas, unless there are clear additional bullish signs starting with sustained progress beyond the record high of $2,956.
The 20-day MA was tested as resistance yesterday and failed as the line was recovered to reflect short-term strength. Furthermore, the end of today is set to be above the 20-day line. This is why multiple indicators are considered when analyzing the market.
A weakness below $2,894 could indicate a bearish reversal
Kim's actions following last week's breakdown are typical in the early stages of a bearish setback. The main support level is broken and, to some extent, follow the support to test pre-support as a resistance. Once that happens, the decline may be ready to continue. The uptrend line and 20-day MA had previously marked dynamic support for the advance following the interim swing low swing in mid-December.
As mentioned above, no resistance was observed in the 20-day MA test. However, it is focused on trendline resistance. Certainly, the gold is a little higher and you can test the line. But below today's $2,894 low, the countertrend rally could be about to close, potentially starting a second leg from a record high.
The next low support goal is about $2,820
A reduction in the ABCD pattern has been added to the chart, assuming that today's highs are the highest swing. Otherwise, the “C” point in the pattern will be adjusted accordingly. It refers to the initial low target of $2,820. That level combines a 38.2% Fibonacci retracement level for $2,813. Together, they provide additional evidence for the possibility of testing support zones ranging from $2,820 to $2,813 if the bearish retracement continues.
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