Gold Broke Through Resistance and Turned Around - 17 June 2016

Gold markets had a very volatile session on Thursday, as we finally broke above the $1300 level. This was a major barrier as far as I can see, and I assumed that it would signal the next leg higher. However, we turned back around to form a massive shooting star and therefore it seems like we have a lot of questions and perhaps may have only found more questions instead of answers during the day. After all, the shooting star is a very negative sign but at the end of the day we did break out to higher levels than we had previously seen. In other words, we broke through a bunch of resistance only to turn back around.

This sets up an obvious trade

For myself, I have no interest in shorting this market although you could make an argument that breaking down below the bottom of the shooting star is a sell signal. When you look at this chart, I see the 50 day exponential moving average, pictured in red, reaching just above the $1250 level. I love to see the 100 and 200 day exponential moving average is below there and they all look very healthy. At this point in time, I would expect that any pullback will have to deal with the 50 day exponential moving average, but I would be surprised if we been reaching down that far. Any supportive candle below would have me buying as I believe it would be yet another attempt to break out in what seems to be a market that wants to go much higher.

On the other hand, we could break above the top of a shooting star which is an even more bullish sign as far as I can see. Quite often, we break over a significant level, it might take several attempts to get above there. I think that’s what we are seeing right now but ultimately gold should go higher in my opinion.

Gold

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.