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Bullish Outside Week Supports Gold Outlook
By Kira Brecht of Kitco NewsMonday March 23, 2015 8:49 AM
(Kitco News) - Nearby Comex gold futures carved out a bullish outside week at last week's settlement, which is a positive weekly formation and suggests gold bulls are trying to stake out a near term low for the yellow metal.
A bullish outside week forms when the high and low of the week exceeds the previous week's range and a higher close is seen. That occurred last week, see Figure 1 below. The formation increases in technical significance when it develops near an important support floor. Gold formed the bullish outside week just ahead of key long-term supports from the November and December 2014 weekly lows.
Shifting out to the daily chart for April Comex gold futures, the market has climbed above the 20-day moving average for the first time since early February. The 20-day moving average at $1,178.30 now becomes support for the market. If gold can sustain strength above the 20-day moving average early in the week it will give the bulls confidence and keep the door open to additional upside probing.
On the upside, the $1,200 level stands as a psychological target and resistance and then more important swing high resistance lies at $1,223, the March 2 daily high. It would take a sustained rally and close above the $1,223 zone to break the recent daily downtrend pattern and to turn the intermediate term trend outlook back to the bullish camp for gold. The 40-day moving average also lies overhead and is resistance at $1,210.60.
In related market action, the U.S. dollar index is vulnerable to additional downside correction, following the recent multi-month rally move. Daily momentum indicators have turned down from overbought levels, which is a negative signal. If the 96.62 support floor gives way, the dollar will be susceptible to a deeper correction, which in turn could provide bullish support to gold.
By Kira Brecht, Kitco.com
Follow her on Twitter @KiraBrecht
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