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Gold Price Retreats, but Bullish Wedge Breakout Holds Promise
By: Bruce Powers | March 22, 2024

• Weekly chart signals potential bearish position for gold, but daily chart shows bullish reversal signal on rally above 2,186, with targets at 2,320 and 2,298.

Gold pulled back further on Friday from Thursday’s low, before finding support around the 78.6% retracement level. The low for the day was 2,157, at the time of this writing. Nonetheless, the breakout of a bullish wedge price pattern earlier in the week remains valid. And the potential for a strong bullish continuation rally remains. That outlook would change on a drop below the bottom of the flag pattern at 2,146, which is usually the maximum stop trigger used by traders, at least when using price patterns.



Wedge Breakout Still Valid

Granted, the retracement following the wedge breakout high at 2,212 yesterday has been more aggressive than we might like to see, as it didn’t go far before hitting strong resistance. Nevertheless, what happens next will be key. A 78.6% Fibonacci level is generally a maximum retracement expected before signs of failure. And when the chance for a continuation of the retracement beyond the prior swing low increases.

Weekly Chart is a Concern

Of concern is the weekly chart. Natural gas is on track to end the week in a bearish position. It will form a bearish shooting star candlestick pattern this week, barring an end of day rally. For next week it will provide a bearish setup in that time frame. A drop below this week’s low 2,212 triggers the setup. Of course, if that happens the bull wedge breakout on the daily chart will have failed to follow through.

On the Upside

On the upside, a bullish reversal signal is provided on the daily chart on a rally above today’s high of 2,186. There is a chance for a sharp rally given the rapid price advance that was seen prior to the wedge formation. The current advance would match the prior at a minimum of 2,320. Note that only the high momentum portion of the previous move is being used, starting from the March 1 daily low. Also of interest is the slightly lower target from a rising ABCD pattern. Symmetry between the CD and AB legs of the trend pattern occurs at a target of 2,298.

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