Levels to watch: gold, silver and crude

Inventories data has sent crude prices sky high.

An oil pump
Source: Bloomberg

Gold bounce approaching crucial 1211 resistance

Yesterday’s hesitancy regarding any further downside appears to have been well founded, with the gold price catching a bid to push out of the descending channel that has been in play throughout April.

Given that this latest bounce has occurred above the 1178 support level means that higher lows remain in play for now. The key to determining whether we are going to go back towards the 1224 resistance point is watching to see if we manage to move above 1211. Should that occur, I would expect to see a bullish phase take hold once more, pushing price towards 1224. A move back above 1224 would complete a complex inverse head and shoulders formation, with a target of 1290, which coincides with the upper boundary of a falling wedge that has been in play for two years now.

Mixed signals for Silver as price reaches temporary crossroads

The daily silver chart is not the easiest to read given the mixed signals that are seen between bearish price-based resistance and bullish momentum indicators. Today’s early strength has brought the price back to the 50-day simple moving average (SMA) at 1648, which coincides with the key resistance at 1645. This would give me some confidence that the price might now move lower given that we have seen resistance at this average on a number of occasions.

However, with the MACD histogram rotating higher, along with a stochastic crossing from oversold, there is an argument to be had that we are set for a further upside in the near future.

I side with price action, and given the recent establishment of lower highs alongside the creation of a double-top (neckline of 1645), this looks like as good a place as any to see sellers coming back into the market. That being said, should we see a break above 1668, it would bring more of a bullish outlook to proceedings.

Inventories data provides shot in the arm for Brent

Irrespective of technical factors, when fundamental announcements shock the markets, the chart will shift to reflect this change in the state of play. Yesterday’s US crude inventories number was one such announcement and this has seen substantial appreciation in Brent crude to post a new 2015 high.

Today’s selloff in early hours points to the potential for a retracement, which would seem likely given the intensity of yesterday’s rise. Much will ride on whether the price can close back below support at 6229 today. Should that occur, I would not be surprised to see a move back towards 6182 in the near future.

WTI breakout completes double bottom

The impact of yesterday’s inventories figure was unsurprisingly felt most keenly in the price of WTI, given that both are US focused and reflect the current state of play for supply and demand of crude in the US. The break above 5439 has been keenly awaited for the fact that it would complete the double bottom formation and subsequently bring a continued bullish outlook for oil going forward.

However, in much the same manner as Brent, for those seeking to get on the bullish bandwagon, I would be hesitant after such a strong move and as such, I would be more inclined to watch for some sort of pullback for a better entry. The four-hour chart has now created two doji’s followed by an inversed hammer, which highlights significant indecision in the markets. Thus I expect that should the price fall below 5720, we could be in for a strong retracement lower for the near term.

That being said, much like the Brent chart, the longer-term outlook has begun to look significantly more bullish given recent developments, and any pullback would likely be a temporary phenomenon.

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