The sound was almost excruciating, everyone screaming “tops in” for Gold and “get out of the way.” As I sit here on Friday morning and write this, Gold is attempting to finish its best week in more than a month since it gained 6.9% the week after Liberation Day. Gold shrugged off two heavy waves of selling, which began on April 22nd and May 7th that equated to a lower high and a lower low. This week’s strength comes after last week’s lower low and one that violated a critical area of support at 3200.
It’s easy to get caught up in the day-to-day volatility, especially when the Average True Range has been above $80 and 2% for more than a month, but last week’s breakdown was a rejection of sellers. Instead of looking at a topping pattern, one should look at the elongated bull flag pattern building.
What does a "bull flag" mean?
A bull flag is a continuation pattern in technical analysis that signals the likely continuation of an uptrend after a brief period of consolidation. It's called a "flag" because it visually resembles a flag on a pole, with the "pole" being the initial strong upward price movement and the "flag" being the subsequent consolidation. Navigating the Commodities markets has never been easier. Get the Blue Line Futures Precious Metals Chart Pack today by registering here: Get Precious Metals Chart Pack
We believe a flag pattern is less about the tightness in shape and more about how the market can react out of those slight lower and lower lows. Furthermore, there is a rising trend line in which Gold has used as resistance, only violating through the early April strength, and the back test of this guideline is now $3600. Which now begs the question! Has Gold entered terminal velocity? This may mean that Gold will not only achieve $3600 quickly but could explode through it to $4000. The key is recognizing these patterns while implementing a trading strategy on what you believe will happen next. Those looking for a daily setup and trading plan can access our daily video called the "Metals Minute." Register for a free two-week trial here: Get the Metals Minute.
