Gold, Oil Talking Points:
- Gold prices have pushed up to a fresh weekly high this morning, continuing a bounce from support that began last week.
- Gold prices are working on their strongest month of performance since July of 2020, which was just before Gold set it’s all-time-high.
- Oil prices have attempted to bounce from the first support test at the $75/brl level yesterday. Today saw a continuation of that bounce although price has already started to temper the move. Can bulls muster anything more here?
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
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It was a quick reversal last Wednesday in Gold. Prices pushed down to the support level I had looked at in Monday’s article plotted around 1737. That level held on Tuesday but on Wednesday, prices began to jump and the 1737 level hasn’t been back in-play since. Price has since moved up to and found resistance off of the next level up at 1759, with further forward drive this morning to test the next resistance level that I had listed at 1769.
Shorter-term, matters are a bit messier, which I’ll look at in the next chart.
Gold Daily Price Chart
If you look at the above chart and focus in on the reversal last Wednesday, you’ll notice an extended underside wick. As a price action trader, this is the type of thing that usually excites me, as a wick of that nature highlights a strong and vigorous intra-period reversal; the type of thing that I might be able to work with for a few days after or, possibly even as the start of a fresh trend. This is, after all, similar to a pin bar formation.
But, upon closer examination of the chart, one will notice that much of that lower wick was concentrated in a one-minute period last Wednesday morning. Right at 8:30 AM ET, price dropped from an open of 1734.9 down to a low of 1719 before quickly recovering and actually finishing that one-minute bar higher, with a close at 1735.8. And, again, this is a one minute chart. So, is it possible that Gold gave back more than $15 and recovered all of that and then some in under 60 seconds? There was the release of a durable goods orders for the month of October so there may have even been motive for a move.
When in situations of this nature, I’ll often assume a data issue. To be clear, I have no verification that it is or is not a bad tick, that’s just my hypothesis from the data combined with simple deduction. And when in these circumstances, I usually want to bias towards less certainty than more. But, perhaps more importantly this cautions me against acting on it. Whereas normally a long wick of that nature would excite for reversal potential, there should be an asterisk applied next to it as much of the lower wick may not have actually traded in the market.
From the shorter-term chart in Gold, this highlights that support is still at the same 1737 level that was in-play last week, and today’s recent higher-high keeps the door open for higher-low support at either 1759, 1750 or 1746.
Gold Four Hour Price Chart
Chart prepared by James Stanley; Gold on Tradingview
Crude Oil Attempts to Set a Base
It’s been a grinding bear market for Oil since the June high, with more than 40% taken out from WTI over the past five and a half months. Naturally political dynamics are at-play and as price gets closer to the $68-72 range that’s been discussed for re-filling the SPR, support has started to show a bit more prominently. Of course demand concern remains an issue and with current events in China, that’s going to be a more difficult item to contend with.
Yesterday saw crude push below the 75 level for the first time since January 3rd of this year, well before the spike brought upon by the Russian invasion of Ukraine. That support inflection yesterday led to a strong bounce that continued through today, raising the question as to whether Crude Oil may be setting up for a pullback.
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WTI Crude Oil Daily Chart
Crude Oil Shorter-Term
From the four-hour chart below, we can start to get some scope to plot for a deeper pullback move. The bounce from below 75 yesterday has led to a re-test of the highs that were in-play last Friday. An attempted pullback this morning was quickly bid, pushing price right back up towards the highs.
This gives the appearance of persistence from bulls and this is something that can lead to a topside breakout, and in this case, that could entail a breach of the bearish…