Western and Eastern technical studies indicate a bullish reversal in gold

Gold traded to its lowest value in the last nine trading days, as market forces pushed the June 2022 futures contract to $1,870.90 this morning. After opening at $1886.80, gold futures declined and then rebounded strongly. As of 4:30 PM ET, the most active gold contract for the month of June 2022 is fixed at $1,896.20 with a net profit of $7.50. More importantly, if the Globex session ends at these levels, it will be a strong indication that the $1,885 support level is active support. However, when we combine today’s price range with east and west technical analysis, it can be proven that the major pivot or reversal was caused by today’s price action.

Chart #1 is a daily gold chart that we used and published where we highlighted the support level we identified at $1885. This chart also shows that the intraday low moved this morning below gold’s 100-day moving average.

Chart #2 is the expanded daily chart for a better view of the daily Japanese candles to get to know them. The Japanese candlestick chart allows us to easily visualize the opening and closing price, in the form of a rectangle. The rectangle is filled with green, which indicates that the close is currently higher than the opening price (a red candle indicates that the current or close price is lower than the opening price). In the case of the opening and closing range today, which is called the “real body” on the candlestick chart, we can see that it opened and closed above the $1885 support that we identified.

One Japanese candle can also be selected. The candlestick that formed today can be described as the “hammer”. This single candle is part of a group known as Parachute Lines and consists of four basic candles written on it; Hammer, shooting star, executioner, and inverted hammer. Parachute lines are candlesticks that show either very long lower shadows and small bodies near the top of the trading range or very long upper shadows and small bodies near the bottom of the trading range.

The “hammer – executioner” is the same except for its location within the direction. Therefore, depending on its location, it will be interpreted as a bullish or bearish candle. If it appears during a downtrend, it can indicate the end of the correction. In such places, we call it a hammer. If the candle itself appears after a specific uptrend, it is called a “Hang-man”.

While a single candle cannot indicate a potential pivot or reversal if it occurs within other variables, it can be a strong indicator of a bullish reversal. Today’s low fell below the 100 day moving average creating a long lower wick. This lower long wick occurs below both the opening and closing price, which shows that when prices moved lower to the day’s low, buyers quickly intervened in the market and bought the dip. These buyers can cover short positions or initiate long positions. Also, the real body (consisting of the opening and closing price) of today’s candle is above the $1,885 support level.

This becomes a very important and correct piece of information, if tomorrow’s candle is a long green candle with a higher high and a higher low of the day, then it will be classified as a confirmed candle. All of these factors will strengthen the assumption that the correction, which began on April 18, which took gold from $ 2003 an ounce to today’s low of $ 1870, is over.

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I wish you always good trade,

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