Technical analysis: key levels for gold and crude

Gold and crude have both lost ground recently, yet despite this, there appear to be good opportunities with upside moves for both markets.

Oil barrels
Source: Bloomberg

Gold heading towards potential rally
Gold has returned to an important cluster of support, with the 200-period (4-hour) simple moving average and trendline support coming into play. The recent pullback has still failed to regain the $1305 level, and this points towards a potential rally back into the wider uptrend unless that $1305 level is taken out.

For now, there are two potential trades around this trendline. Firstly, a potential long from the shorter term 76.4% retracement (current price), based on the premise that we will not see a break back below $1311 and instead move back to $1334.

That roughly provides a 3-1 risk-reward ratio. Alternately, a wider stop below the $1305 level and target of $1340, which would be a 2 to 1 R/R. Both are based on the potential for a break higher, which of course is not a given. Yet given the current depth of the pullback we are seeing, the value seem to be towards the upside rather than for further losses.

Brent set for a bounce
Last week saw a symmetrical triangle to the downside, creating a new two-month low for the market. Interestingly, price came right into trendline support and posted a hammer candle. With that in mind, there is a good chance we could see a bounce to start this week and continue this recent wider wedge pattern.

There seems to be more value to being long than short for now, with the market heavily overextended to the downside. A key signal that we are set for a bounce would be an hourly close above $46.22.

This is based upon the idea that we will not see a break back below Friday’s low of $45.50, which would negate this bullish view. Key resistance levels above $46.22 are $46.84 and $47.26.  

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