Levels to watch: gold, silver and crude

Correlated charts provide a great opportunity to spot an impending breakout, with silver and WTI leading the way.

Silver coins
Source: Bloomberg

Gold consolidation remains

Gold remains stuck within a period of consolidation, with price action tightening as made evident by the narrowing Bollinger bands. The current four-hour candle seeks to push the price back lower, towards the $1150 mark. A close around current levels would constitute the formation of an intraday evening star candlestick pattern.

Bias is therefore towards a move to the downside, with $1150 likely to come within today’s session. However, the breakout from this current triangle formation will provide direction for the medium term. I do expect us to see $1132, yet with daily stochastics turning upwards from oversold, alongside a MACD histogram which is moving upwards, I would not be surprised to see a retracement higher before another leg lower.

Either way, direction will be provided by a break below or above the current triangle formation and, until that happens, sideways intraday trading remains prudent with the one-hour stochastic a key tool for catching those moves.

Silver testing key support

Silver could provide the lead on a move lower for its older brother gold, with price currently attempting to break below both an ascending trendline and the 50-hour SMA. Price action has similarly been trading within a symmetrical triangle formation and, should we move below the lower boundary, it could provide us with a hint as to the direction of breakout for both gold and silver.

I would need to see price close below $1549, however, to give me confidence that this is truly going to be the breakout we are waiting for, and thus for now I am only moderately bearish until that move occurs. Resistance is clearly defined at the 100-hour SMA and, with the MACD histogram looking to move lower in both one- and four-hour timeframes, I would not be surprised to see momentum carry price action below that $1549 level. Should that occur, $1529 could be challenged yet again.

Brent falls back in pivotal technical phase

Brent’s inability to break towards the 20-day SMA yesterday was very telling and, despite the early gains, we saw yet another day in the red come midnight. Given that we are coming off the back of the February correction, markets are eagerly trying to determine whether this is simply a breather prior to moving higher or a continuation of the huge downtrend in place since June 2014.

The pivotal level to watch is still $5592, a broach of which may indicate a more protracted move lower. Any close below $5592 would be likely to bring the bears back into the market and could see a sharp selloff as it acts as a signal that this move lower is going to last longer than the bulls expected.

Be aware that any upside is likely to be capped by the 20-day SMA, and a break above this level would be the indicator I need to become a little more bullish in bias.

WTI breaking lower

Unlike Brent, WTI appears to be taking the lead lower, pushing below a key descending trendline today following yesterday’s close below the $4910 support level. With this comes an increased bearish bias with intraday resistance now being formed at $4733. I do not expect to see a sharp selloff, yet the steady decline in WTI prices appears to have more legs.

The warning to be adhered to is that, with yesterday’s daily candle having closed exactly on the support trendline, I would need to see a daily close below $4710 to gain confidence that the falling wedge formation had been broken.

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