- February 26, 2021
- Posted by: Tradingshot Articles
- Category: Commodities
Today Gold hit the June 19, 2020 low after a very aggressive 2-day selling sequence. The dominant pattern since the August Highs (All Time Highs to be more exact), is a Channel Down and to better illustrate it I have used the Fibonacci Channel.
As you see most of the price action since the All Time High (ATH) is concentrated within the 0.786 and 0.236 Fibonacci levels (blue zone). That is the High Volatility zone. The price only broke outside the Channel two times during these 7 months, once on August 12, 2020 to test the -0.236 Fib extension and on January 06, 2021 to test the 1.382 Fib extension. So we can say that this pattern has been impressively consistent for such a long period of time.
However this is the first time that the Channel Down has entered the Major long-term Support Cluster (green zone). That is basically the consolidation phase roughly within April 15 to June 15, 2020, which was when the market was undecided following March’s first stimulus package and was looking for direction. So ahead of the new stimulus vote, can this Cluster offer the Support and buying pressure that the market needs once again? It is possible but will it be on the (current) top layer or the lower one (1670 – 1680).
At the same time the 1D RSI just hit its multi-year Support level. Every-time this level has been hit, Gold made a strong rise. Within the Channel Down in particular, the rise normally hits the 1D MA50 (blue trend-line). That typically happens to be at least on the 0.5 Fibonacci retracement from the previous Lower High.
So if today was the new Bottom, then the potential rebound should technically hit anywhere within 1815 – 1835. And if the stimulus gets voted, then the Major Support Cluster may offer the necessary demand to break the Channel Down upwards and reverse this 7 month bearish trend.
What do you think? Is the selling over for Gold?
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