Gold prices continued their consolidation on Friday, hovering around weekly support at $3,260. The price action formed an “outside day,” with a high of $3,371 and a low of $3,265. This pattern is considered somewhat bearish because the rally above Thursday’s high was followed by a sharp decline below its low. This shift in momentum echoes the previous day’s bearish shooting star candlestick reversal pattern, marking a potential turning point.
Weekly Bearish Shooting Star Candlestick Pattern
Looking at the broader picture, gold is on the verge of forming a weekly bearish shooting star candlestick. This pattern will be validated if the price declines below the low of the week at $3,260. However, the range for this week has been wide, between $3,260 and $3,500, which suggests that there could be more consolidation before a breakdown is triggered.
The formation of this weekly shooting star comes after a daily shooting star earlier in the week, which marked the high for the current trend. Since these candlestick patterns are fractal in nature, confirmation on the weekly chart could indicate a more aggressive sell-off than what has been observed thus far.
Key Support Levels: 20-Day MA and Fibonacci Retracements
Immediate Support at $3,228
The first key support level lies around the 50% Fibonacci retracement level at $3,228, coinciding with the April 16 low. If gold breaks below this level, it would add further confirmation of a trend reversal, signaling that the recent high might have marked a local peak.
20-Day Moving Average (MA) at $3,195
The 20-Day MA, a key trend indicator, continues to rise and is now at $3,195. Since the line was reclaimed on January 7, any pullbacks have generally failed to find support until prices traded below it. If gold approaches this level, a similar outcome might occur, where the pullback leads to a potential breakdown.
Support Around $3,168 and $3,164
If gold dips below the 20-Day MA, the next potential support zones lie near the prior trend high and the 61.8% Fibonacci retracement levels at $3,168 and $3,164, respectively.
Lower Target at $3,073
A more substantial decline below these levels would push gold toward the 78.6% Fibonacci retracement at $3,073. This represents the lower boundary of potential bearish action if the downtrend intensifies.
Outlook and Next Steps
Gold’s overall trend remains upward, but recent price action suggests a possible pause or correction in the near term. The emergence of the bearish shooting star candlestick on both the daily and weekly charts is a warning sign for traders. If the $3,260 level fails to hold, the likelihood of further downside increases. Traders should monitor the support levels at $3,228, the 20-Day MA at $3,195, and the Fibonacci retracements for signs of a breakdown. A breach of these levels could lead to a more prolonged bearish correction, potentially testing lower levels around $3,073.
For now, the market seems poised for a period of consolidation, but the risk of a sharp decline remains if bearish confirmation occurs.
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