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Commodities Brief: Potential “bear flag” patterns forming on gold and silver charts
FXstreet.com (Barcelona) - The precious metals continue to
consolidate after the major losses suffered early last week. Given
the reaction to China GDP last Sunday, it will be important to keep
an eye on HSBC China PMI due out on April 23rd at 2:30GMT. There
will also be some important data to monitor out of the US this week
such as Existing Home Sales, Durable Goods, and Advanced GDP.
Given the recent misses in global economic data, any further misses will not likely bode well for commodities markets in the coming weeks. The US Dollar Index remains fairly range bound, but any strength would also be a negative factor for commodities prices in coming sessions.
From a technical perspective, both gold and silver appear to be forming "bear flag" formations on the daily chart. This is a common pattern that forms after major declines as market participants attempt to determine if prices have bottomed, or are correcting short term before the next leg down. A close below 1380 in gold would confirm the bear flag pattern, with a measured move target of apx. 1160. A close above 1435 would negate the pattern. First resistance on gold comes in at 1433 (the 9dma), followed by 1452 (supply candle on 60min chart). Initial support sits at 1380 (short term uptrend line), followed by 1350.
The silver daily chart is forming a similar consolidation, with a close below 22.60 needed to confirm the pattern which has a measured move target of apx. 17.60. A close above 24.00 would negate the pattern. First resistance sits at 23.80 (supply on daily chart), followed by 24.43 (the 9 dma). Initial support sits at 22.60 (short term uptrend line), followed by 22.05 (low price on April 16th).
The energy complex also had some interesting pattern developments take place last week. Oil closed below the support trend line of a multi-year pennant pattern which has bearish implications going into next week. The pattern has a longer term measured move targets as low as 65. Only a close above 91 would negate the pattern and help turn the trend back to neutral.
Given the damage that has been done on the longer term time frame charts to the precious metals and energy sectors, it's hard to argue a "sell the rally" mentality in commodities won't be the theme going forward.