Gold Technicals – Bearish Momentum Stalling While Bulls Enjoy Breather

Gold prices have stabilized significantly after the continuous side since the start of the week. Prices have been trading mostly between 1,325 – 1,335 for the past 36 hours, a welcomed change for bulls who saw prices tanked from a high of 1,392 to 1,330 within 3 days.

Why the change of pace? The most obvious answer would be the fact that a bullish pullback is long overdue. Nothing much has changed fundamentally – No bullets are fired in Crimea, while broad economic narrative remains the same, and hence the factors that caused prices to declined between Monday to Wednesday is essentially the same, and the only difference from now and then could simply be the fact that market players are already loaded up in short positions and unable to sell further.

Hourly Chart

If the above assertion is true, then the likelihood of prices pushing higher increases. This is not an unreasonable expectations as prices have seen broken away from the descending Channel, impairing the bearish momentum and opening the door for a slight rebound, provided 1,335 resistance is broken that is. Stochastic indicator tells us we are in the midst of a bearish cycle, but it is possible that Stoch curve may still reverse from here given that current Stoch level has seen numerous points of inflexions in the past week. Considering that we are at the end of the week now, the likelihood of traders who have been shorting Gold wishing to close out their positions becomes even higher, and a short-squeeze scenario may happen.

Daily Chart

Daily Chart agrees with this possibility as prices have tagged and rebounded off Channel Bottom, while Stochastic readings are also within the Oversold region – favoring a bullish push in the next few trading session. Also, seeing as how institutional speculators have been buying up Gold in huge quantities in the past, one wonders if these institutions may still want to buy Gold at “bargain prices”. If yes, then the likelihood of a bullish push towards Channel Top would be even higher. But this is a double edged sword, as the likelihood of aforementioned institutional traders clearing their long positions becomes higher if 1,315 or 1,300 support levels are broken.

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