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Levels to watch: gold, silver and crude

Gold returns to its range while crude creates a crucial new low.

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Oil poured into a barrel
Source: Bloomberg

Gold consolidates following Tuesday’s selloff

The inability to close above $1224 on Monday means we have found ourselves back in the $1178-1224 range that has been in play for two months now.

This morning has seen us continue the consolidation that dominated yesterday’s trading, with the price repeatedly bouncing off the 200-hour simple moving average. This current consolidation looks a lot like a bearish flag formation, which is a continuation pattern. Thus I expect to see the bears come back into play soon, with confirmation of the next leg lower coming with a break below $1203. Ultimately I can see us returning to $1178 in the near future.

Silver pullback reaches support, yet flag provides possibility of deeper retracement

The pullback in silver on Tuesday yesterday was followed by a doji candle, which is a reliable indecision candle meaning it often can denote a change in sentiment. With that in mind, there is a possibility that this selloff is over and that the bullish sentiment is going to resume today. However, I am also aware of the fact that on the intraday markets, we are seeing a flag formation, much in the same manner as the gold charts. Support for that flag is being provided by the 200-hour SMA (currently $17.07).

With that in mind, I am open minded for another move lower within this retracement, which would be sparked by a move below the 200-hour SMA. However, I remain bullish for the medium term and even if we did move lower I would be looking for a move towards $18.50 in the near future. Given the doji yesterday, this could happen sooner rather than later with a possible morning star reversal in play should we see a green candle at the end of trading today.

Brent retracement likely to end soon as bearish outlook holds

Brent has seen a steady grind higher during the past 34 hours, following the new low created on Tuesday. That ability to notch another low means we have now seen two lower highs and lower lows. I remain bearish and expect to see the sellers come back into play within the near future.

There is no perfect way of telling exactly where it will sell off from again, and thus the most reliable thing is to watch for a new lower low on the lower timeframes. However, the $53.40 level hit this morning is a key resistance level, representing both the 20-period (four hour) and the swing low from 15 May.

Either way, I do expect us to return to a bearish phase before long and at which point we will be looking for a move into a new low, below $64.00.

WTI strength likely to be short-lived

In a similar manner to Brent, I expect the strength seen since creating a new low on Tuesday to be short-lived and am looking for a move lower in the near future. Also in the same kind of manner, we have the 20-period SMA (four hour) and 15 May swing low ($59.40) providing resistance today. That may be the spark we need to see selling, but ultimately whether it is or not, I am looking for a move back below $58.00 in the next few trading days for WTI.

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