Gold with another bullish formation
|Gold buyers can be definitely happy with the first few days of October. September ended on the monthly lows, so optimism was not he strongest feeling among traders. What is more, the price was under the influence of a huge head and shoulders pattern, which usually is a grim reaper for the bullish trends.
I have to admit, that the Head and Shoulders formation looked really nice. It was a proper, very well-formed pattern. I was totally not surprised, when the price broke the neckline on the 1483 USD/oz (yellow). After this kind of breakouts, it is absolutely normal, that the price reverses and tests the broken support as a closest resistance. The same happened here but what was unusual is that the new resistance did not work at all. Price returned above the yellow line with ease, leaving new sellers pretty much empty handed.False breakout as its finest.
New week, brought us the test of the yellow area as a closest support. Test was positive for the buyers and the price went up again. October’s reversal allowed to create another technical formation – flag (blue lines). In this case, flag is a bullish formation and should end with a breakout to the upside.
That is just a theory though. As you can see, today’s contact with the upper line of the flag is negative and the price creates the shooting star candlestick. That delays the buy signal for a while. The proper signal to go long, will be triggered, when the price will close a day above the upper blue line. Chances for that are currently still quite high.
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