Gold (XAU/USD) attempted to build on its recent bullish breakout but has faced resistance, forming a bearish outside-day candlestick pattern that raises questions about the sustainability of the current uptrend.
After consolidating for 18 sessions, gold prices surged higher on Monday, signaling a breakout above the upper boundary of a bull pennant formation. This move was initially confirmed by a daily close above the trendline, suggesting renewed bullish interest. However, the breakout remains vulnerable without a decisive push above the recent swing high of $3,451.
On Wednesday, gold reached a new high at $3,439 before experiencing a sharp intraday reversal. Sellers dominated the session, dragging prices down to a low of $3,381 — undercutting Tuesday’s low of $3,383. This reversal forms a classic bearish outside-day pattern, casting doubt on the validity of Tuesday’s bullish breakout.
Although this bearish signal does not invalidate the broader bullish structure, it hints at a potential short-term pause or pullback. If prices close below Tuesday’s low and the pennant’s upper boundary, further weakness may follow, keeping gold trapped within its previous consolidation zone a bit longer.
Key Support Levels to Watch
The initial support zone lies between $3,377 and $3,366 — the upper boundary of the former 18-day consolidation range. Below this, technical support aligns around the 20-day moving average at $3,340. Notably, this level also closely aligns with the 50-day moving average at $3,335, creating a stronger confluence of support should the pullback deepen.
Technical Outlook: Another Breakout Attempt or Deeper Pullback?
With gold trading near the apex of the pennant formation, traders should brace for heightened volatility. While the daily chart shows hesitation, the weekly chart paints a more bullish picture. A weekly higher high and higher low have already formed, signaling strength. A weekly close above $3,377 — last week’s high — would confirm a continuation of the longer-term uptrend.
Conclusion
While gold’s technical breakout initially inspired bullish sentiment, Wednesday’s bearish reversal signals caution in the short term. Price action around the $3,377–$3,366 support zone and the ability to hold above key moving averages will be critical in determining whether another breakout attempt materializes — or whether further consolidation lies ahead.
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