Gold bulls failed to successfully defend the $1740 - 50 spot area in a Sunday night sell-off that seasoned metals traders have often observed. That said, metals have a tendency to “overshoot” support and resistance areas.
The below daily gold chart shows that this may again be the case, as stochastic RSI is now in the oversold position with price making a higher low (for now) while tagging the former downtrend line. The price is also at the bottom end of the Bollinger band channel.
For comparison, last week, we mentioned stocks were looking to come down off resistance, having pointed to the stochastic RSI as well. This morning, stocks have accelerated the selling seen on Friday. The indicator has further to go before reaching oversold territory, with the 50-day moving average looming below.
In this trader's opinion, the opportunity for upside in gold remains intact, while caution in the stock market continues to look like the prudent approach in the short term.
Thanks and have a great week.
