Gold futures warning: bull flag breakdown points to further downside risk for GC traders π
Gold futures (GC) have recently broken out of a significant bull flag formation, and after a strong rally, prices have now pulled back, raising concerns among traders and investors. Letβs dive into the details and what it means for those holding or trading gold.
Gold 4h chart. Retesting broken bull flag. Still bearish.
Understanding the measured move: a key level for professional traders π
After breaking out of the yellow bull flag on the 4-hour chart, gold prices made a βmeasured moveβ from the low point A to the top of the bull flag pole at B, reaching as high as C. In trading, a measured move is a projection based on the initial rally (or decline) within a pattern, allowing traders to estimate where the price might head next. This level often aligns with Fibonacci retracements, with the 50% level in this case acting as a key decision-making point for professional traders and algorithms, who tend to sell at the completion of a measured move.
In this case, the measured move fulfilled its target, and prices began to pull back, signaling that some traders are locking in gains and potentially positioning for a reversal. This is often seen as an exhaustion point, where buyers lose steam, and sellers start stepping in.
Retesting the broken bull flag: signs of weakness? π§
Now, gold is retesting the previously broken bull flag, a critical area that could either act as support or become a point of resistance. As of the latest data, GC futures are trading below the Value Area Low (VAL) of approximately 2635-2636, adding further bearish pressure to the outlook. If prices close below this level today, it may signal that support is not holdingβa significant concern for gold bulls.
What traders should watch π
- Closing price relative to VAL (2635-2636): A close below this level today would be a bearish signal, indicating that the support zone is failing to hold.
- Consecutive closes below VAL: If today and tomorrow both close below 2635-2636, it could reinforce a bearish trend, making it even harder for gold to recover in the short term.
- Bull flag as potential resistance: Now that the bull flag is broken, it may act as a new resistance point, which could further press down on prices.
Bottom line: is gold at risk of further downside? β οΈ
The recent breakdown from the bull flag, the completion of the measured move, and the failure to hold above the Value Area Low are all red flags for gold bulls. Should prices continue to close below 2635-2636, it could signal a stronger bearish trend for GC futures. As always, traders should approach with caution and assess their risk, as the market could face additional selling pressure if these support levels fail to hold. Trade at your own risk and visit ForexLive.com for additional views.