Levels to watch: gold, silver and crude

Consolidation reigns following a strong move higher in commodities.

Gold bars
Source: Bloomberg

Gold retracement likely to bring further gains

Yesterday saw a continuation higher in gold, building on the gains seen earlier in the week. The sharp upside followed by temporary intraday retracements is indicative of a strong breakout trend and given the move lower seen today, it is likely we are going to see the same again.

The retracement seen yesterday morning came back to just 23.6% of the Friday low to Monday high and given that shallow move, I would expect a deeper move lower today. The prime target for that next leg higher is at $1207, which represents a confluence of Monday’s peak, combined with the 50% retracement of yesterday’s move higher.

Ultimately I will only become more neutral should price fall below $1199 as this would create a new lower-low. That being said, with price now towards the top of the range seen in the past month, there is significant resistance around $1220-$1224. Thus I could see price begin to reverse around that area and only a close above $1224 would bring confidence of a move higher than that level.

Silver approaching resistance zone

Silver’s gains have pushed the price towards the upper section of the symmetrical triangle that has been in play over the past six months. The precious metal has sold off between the 200-day SMA and an ascending trendline (beginning in July 2014) on three occasions. Therefore any move into that zone (currently $16.74-$16.95) would bring warning signs of a potential reversal lower.

In the meantime, price is retracing and I am expecting to see a jump higher in the near future with support provided by $16.49 (Monday’s high).

Brent continues to retrace

Brent Crude is moving lower for a third consecutive day, retracing some of the gains seen this month. However, these have been somewhat minimal and a major challenge to this recent downside is likely to come at the 50-period (4 hour) SMA which held up prices last week.

I would need to see a move back below $61.40 for an indication of a potential longer reversal lower. Thus for the time being, I expect to see a bounce higher in the near future for a continuation of the medium-term uptrend.

WTI range holds for over two weeks

WTI has been trading within a sideways channel for over two weeks and there are few signs that we are about to see a breakout. Values are starting to tighten, forming a potential symmetrical triangle yet for the time being I expect to see continued moves between the $55.73 and $58.40 zones.

Thus the key is to play the intraday swings and for the moment, the sign is that we could see a move back to $56.10 in the near future for another move higher in the near future. 

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