Hawaii Six O - Gary Wagner
Gold recovers after trading to a low of $1684.20 this morning
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Gold futures staged a dynamic recovery today. After trading to an intraday low this morning of $1684.20, selling diminished and buying was revitalized, taking gold pricing well above $1700 per ounce. The low today was $0.80 above its 50-day moving average which currently is fixed at $1683.30. As of 4:22 PM EST gold futures basis the June 2020 Comex contract is trading at $1711.70 (+0.37%).
The 50-day moving average is a widely accepted technical indicator that market technicians use to determine whether or not a stock or commodity is in a short-term bullish, or bearish trend. If current pricing is above its 50-day moving average it is interpreted as an indication that the stock or commodity is in a bullish trend currently.
In the same fashion the long-term bullish trend is determined by many if the pricing is above or below (bearish) its 200-day moving average. Gold has remained above its 200-day moving average since mid-November of 2018, with one brief exception on March 18 of this year, when for a period of five trading days gold pricing was under the 200-day moving average.
That being said the fact that today’s intraday low fell within one dollar of its 50-day moving average is significant. The technical indicator served as a beacon for the bullish faction signifying that current pricing in gold is in overbought scenario and that it was time to bid the precious metal higher.
The other significant move today occurred when gold futures moved back above $1700 per ounce, which is a key psychological level which was not broken yesterday, today however gold traded below that key psychological level.
The single candlestick that was identified as a result of today’s price action is simply known as a hammer. According to Investopedia, “A hammer is a price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies within the period to close near opening price. This pattern forms a hammer-shaped candlestick, in which the lower shadow is at least twice the size of the real body. The body of the candlestick represents the difference between the open and closing prices, while the shadow shows the high and low prices for the period.”
The candle and pattern known as a hammer cannot be acted upon alone as it requires confirmation. Bullish confirmation would occur if tomorrow’s candlestick contains a higher low, and a higher high than the previous candlestick. Also, the candlestick must big a green candle the bigger its size the stronger the conformation.
Since yesterday’s candle was a large red candle that occurrence would also create a variation of a “Three River Morning Star”. The reason it would be a variation off of that pattern is that today’s candlestick did not have a open and closing price that was below yesterday’s candle. If that had happened, we would identify today’s candle as a hammer that is in the morning star position. In either case today’s recovery from the lows just above its 50-day moving average could be significant and indicate that at least on a short-term basis gold found its footing and support at current pricing.
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Wishing you as always, good trading,