Gold is struggling to hang on to its 21-day moving average; if it loses the battle just how much downside can we expect?
Yesterday I was stopped out of my long gold bet below the 21-day safety net, so now seems like a good time to take a fresh look at the bling market. For starters, I've got gold in a long-term bull market with the correct moving average sequence led by a long-term rising 21-day moving average. For me, at this stage, I'm only looking to trade with the trend, so rather than opening a sell bet I'm looking for sensible points to consider buying again.
The price is currently perched bang on the 21-day moving average at $1232, and there is a chance that it holds the level and pushes on from here. This case is strengthened by the success of a trend line dating back to March which, apart from one intra-day interruption, has held firm. In this case I'd look for a close back abov $1247 to take out the Marabuzo resistance and put the bulls back on course.
However, the signals are mixed; the RSI is clinging on at 52, but the Parabolic SAR and MACD indicators both turned red yesterday. So, if gold breaks lower what levels will I be looking at as possible entry points for a long bet?- the 50-day moving average, currently at $1214. On both the previous occasions when the price broke through the 21-day defence, the 50-day MAV played a blinding sweeper's role, mopping up all the loose stock.
- just below that I'd be looking at big figure support at $1200, though the intra-day dangly bits emphasise the need to stand aside and wait for a closing candle above the line.
- Fibonacci offers three levels. The 38.2% retrace of February's low to last Monday's high is $1180; the respective numbers for 50% and 61.8% retracements are $1155 and $1128, though I'd expect the 200-day moving average to step in before that.
Of course, if the market does drop to the lower levels it would likely drag the trendy 21-day moving average below its 50-day brother, thus weakening the bullish argument.
