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Gold hits profit-taking in July

Gold had its best month in June for exactly three years. In fact it was this performance that finally took prices above the 2016 peak of $1375.

In the daily chart below we can see how the break above the blue 100-day moving average at $1296, and then the seven-month trendline (from mid-April), was the trigger for bulls to act.

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The move from the low of $1268 in mid-May saw prices jump a full $170 in just over four weeks, reaching $1438 last week. As you can see in the daily chart above, the commodity had been severely overbought on the slow stochastic throughout June. (Another good example of why you never sell blindly into an overbought market, especially when it is in a bull trend!)

In the weekly chart below we see the shooting star candle formation – a bearish reversal candlestick pattern that typically occurs at the top of uptrends. It indicates that bulls were taking profits aggressively as the price closed just $8 above the open for the week.

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Yesterday morning the price gapped lower and below the first 23.6% Fibonacci support level of $1399/98. This should now act as resistance for this week.

We traded down to $1381.50 yesterday, just above the one-month trendline you see in the four-hour chart below. It’s a solid short-term trendline but a break below $1380 suggests a test of more important Fibonacci support at $1374/73.

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Bulls must hold this level to remain in control of the medium-term trend. A break below $1370, however, targets $1365/65, $1360/58, perhaps as far as $1355/53 this week.

Bears could try short positions at $1398/99 with stops above $1402. A break higher fills the gap at $1406/08, while a break above here targets $1410, meeting minor resistance at $1413/14. Further gains would target Friday’s peak at $1424 before the $1437/39 area where we met with significant selling pressure last week.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit Intertrader

The content of this article is the personal opinion of the author and not Intertrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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