By Mohammed Isah of fxtechstrategy.com
The recent price action in gold futures has reinforced our short-term bearish outlook.
to view a chart of gold futures.
Gold's failure at the 1,125 level, its Feb. 3 high, and its subsequent declines through its swing low at 1,074.55 and its Dec. 22 low/longer-term rising trend line at 1,070.06 has put it in a short-term downward trend. This increases downside risk toward 1,030.85 and 1,026.55, the March 8, 2008 high and Oct. 28, 2009 low, respectively.
Those levels should provide support on initial tests and turn the commodity higher. Below those levels, the next downside objective lies at 986.67, the October low.
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The weekly relative strength index and stochastics are bearish and pointing lower, suggesting further downside.
That said, there is reason for caution for those looking to make bearish bets. The daily chart reveals a rejection candle, which is a bottom reversal signal, at the end of Friday's session.
If this triggers a recovery, we could see gold push higher toward 1,074.55, the Dec. 22 low, and 1,070.06, where its longer-term rising trend line is located. A combination of these levels should put the commodity under pressure and turn it lower again. Further out, resistance levels are located at 1,125, the Feb. 3 high, and 1,148.48, the Jan. 20 high.
In conclusion, gold retains its short-term bearish trend, having taken out strong support levels this week. However, a corrective recovery may be shaping up.
Mohammed Isah is a technical strategist and head of research at FXTechstrategy.com, a technical-research Web site. He has been trading and analyzing the foreign exchange market for the past seven years. He formerly traded stocks before crossing over to the forex market, where he worked for FXInstructor LLC as a technical analyst and head of research before joining FXTechstrategy.com. He has written extensively on the forex market and technical analysis and his articles have been featured in The Technical Analyst Magazine, The Forex Journal Magazine, The International Business Times and FXstreet.com. At FXTechstrategy.com, he writes daily, weekly and long-term technical commentaries on currencies and commodities, which are offered to its clients. He also produces
for his subscribers. He provides full coverage of the forex market with specific focus on G10 currencies as well as the commodities markets, with focus on five key commodities.