Gold: Holding Above 1260, Key Level Of Support

Last week's Bullish Pinbar at the 1260 support raises the strong possibility of a revisit to 1300 and 1330. Assuming we trade at these levels, how price reacts here could be very telling of the future direction ...

GOLD WEEKLY:
We can see on the weekly chart how 1180 and 1425 are the levels which need to be broken in order to confirm a new bullish trend or resumption of the bearish trend. However between these levels has become particularlya tricky as just when you think a move has momentum to confirm the direction we then see a reversal and price contracts. We could in fact be at the beginning of a much larger triangle which would see some erratic mini-trends and whipsaws throughout the remainder of the year.

At each swing point we can see some classic Japanese Reversal patterns which turned out to be quite reliable (for a small while at least...) only to see another reversal pattern form with subsequent directional change. Last Friday's closed at pretty much the same level it had opened on the previous Monday, and the assault down to 1260 which was then successfully defended by the bulls provided us with the Bullish Pinbar reversal.

So is 1300 and 1330 now back on the cards? Quite possibly...

GOLD DAILY :
However there is an alternative scenario to the triangle so I have highlighted the potential for a bearish channel to form. Whilst 1300 is a psychological round number and is a likely resistance point I feel there are more prominent levels which are more likely to hold as resistance. 1330 is one of these levels as it would be the upper channel, pivotal S/R and also in close proximity to the 38.2% retracement. We should also take note of the fact the 200eMA and 50eMA are still declining therefor medium-long-term momentum is bearish.

If we do trade back up to 1330 then how price reacts at this level could be very telling of the future direction, because respect of this level would then bring the bearish channel into play and for the 1260 to be retested - which in turn would open up the 1180 lows if broken.

As much as I like this scenario what does raise a little doubt is how the Bullish Piercing Line pattern (green) which respected the 1260 support also created a higher swing low. In turn this suggests the run down from 1360 is losing momentum. Therfor any break of the suspected channel can be seen as a bullish green light and a retest of 1400 (the 200eMA) and maybe even further....

SUMMARY:
- Break below 1260 opens up 1180
- Break above 1330 opens up 1360, 1400

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