Exciting things are currently happening on Gold’s chart, where traders are trying to back down from the optimism seen here in February and the first few days of March. The most recent movements are very technical, and it seems like nothing here is happening without reason.
First, let’s come back to the beginning of March. The price was surging, and on Mar. 8, it managed to set new long-term highs of $2070. That was very close to the all-time high gold reached back in August 2020, so you can imagine the strength of this resistance.
The price reaching this resistance was a great reason to capture some profits. It was a good idea for local sellers and buyers because it’s always helpful to cool down the indicators, screaming that the precious metal is in an overbought state.
Although a minor bearish correction would be healthy, traders took it up a notch, and instead of a correction, we’re currently seeing a full-scale reversal. Gold managed to create a head and shoulders pattern (yellow), and remember, it’s happening in a crucial place – just below a significant resistance. The H&S has a neckline (red), and this neckline is under fire today.
Gold is currently trying to break the red line, and once the sellers succeed in doing that, we’ll be able to claim a bearish victory and witness the birth of a major mid-term sell signal. Remember that the breakout is not a fact yet.
We need to see the daily candle closing below the red line to confirm this. So far, so good, but today will be crucial, and the aftermath of Tuesday’s trading will have a chance to show us a direction for the next few weeks.
