Gold on the verge of completion of bearish H&S

  • Gold specs adding shorts and price forming a bearish Head and Shoulders.
  • Bears can target prior structure in the 1830s.

Speculators reduced their net gold positioning this week, adding shorts as stimulus newsflow skewed to the negative side.

From a technical perspective, this gives rise to confirmation of downside prospects, if not to continue to trade in a range-bound manner in the near-term.

The following is a top-down analysis to illustrate the bearish potential.

Monthly chart

The price has room to go before meeting a 38.2% Fibonacci retracement.

Bears will be looking for weekly and daily direction to marry-up.

Weekly resistance

Stong resistance keeps the bulls in check, creates prospects for the downside. 

Daily bearish head and shoulders

From a 24-hour perspective, the formation of the right-hand shoulder of what appears to be the making of a had and shoulders is encouraging. 

Bears can enter the market with a stop loss above the structure and target at least a -0.27% Fib at 1832.

However, there are still longs being added on a positioning basis which means there is still room for a move to the upside. 

 

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