Gold Price Forecast: Bullish Hammer Pattern Hints at Potential Recovery

Gold looks to be trying to establish a bottom as it fell to a new trend low of 2,537 on Thursday before buyers took back control and generated a strong bounce. This puts gold on track to end the day forming a bullish hammer candlestick pattern. Support was seen in an area previously discussed around the August high of 2,532 and the 50% retracement level at 2,534.

Also, notice that today’s low was near the lower extended trendline from an earlier bull flag formation. In other words, today’s low is a logical area to find resistance that may lead to a sustained bullish reversal

Bullish Reversal Indicated Above 2,681

A bullish reversal will be triggered on a decisive rally above today’s high of 2,681, at the time of this writing. Some technical damage was done during the current decline as support failed first at the 20-Day MA, then the 50-Day MA failed. That was followed by a monthly bearish reversal of October’s price range on a drop below the daily swing low of 2,602, which was also the monthly low.

Those indicators all show potential resistance levels on the way up, assuming today’s low is sustained. If it is not and today’s low is broken to the downside, then crude oil looks likely to approach a possible support zone from 2,484 to 2,473. The top level is a prior resistance top, and it is followed by the 61.8% Fibonacci retracement level.

Brief Dip Below 20-Week Moving Average

It is also interesting to note that the drop today briefly put the price of crude oil below the 20-Week MA (not shown), which is at 2,556. The 20-Week MA maintained support almost 100% of the time since it was reclaimed during the week of October 16. It provides additional evidence for a potential low today, at least on a temporary basis. And it has proven to be a viable trend indicator and should continue to do so. This means that a drop below today’s low will also further confirm a breakdown of the long-term weekly moving average.

Rise Above 2,619 Needed

Crude oil needs to rally above and stay above Wednesday’s high of 2,619 to have a chance at going higher. Resistance around the internal uptrend will also need to be watched as it is currently around yesterday’s high. That trendline should provide clues as it is also the bottom support line for a rising parallel trend channel. The channel shows symmetry within the uptrend. That symmetry was broken on the drop below the lower line, and the next lower trendline is down a bit on the way to the 200-Day MA at 2,398.

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