(Kitco News) - August Comex gold futures bulls have the edge Monday morning. Action over the last three weeks formed a type of "morning doji star" pattern on the weekly candlestick chart. This is a "bottoming" formation, which suggests for now the recent sell-off phase has come to an end. The short-term trend outlook is bullish. See Figure 1.
The morning doji star is a bullish candlestick pattern that forms first with a long black "real body" seen the week ending May 30. The second part of the pattern is the "doji" seen the week ending June 6 and the pattern was confirmed with last week's weekly green candlestick which closed with solid gains for the week. Bottom line? The $1,240.20 low is major near term support now.
Shifting to the daily chart, we see even more technical evidence of an improving situation for the gold market near term. See Figure 2 at the bottom of the chart. August Comex gold futures have rallied through the old breakout point from April 24 at $1,268.50 —which is a bullish signal. Additionally, the market has climbed above the 20-day moving average (seen in blue), another positive short-term chart development. Finally, the relative strength index, a widely watched momentum tool is pointing higher.
Add it all up and the near term trend outlook is bullish. The April 24 daily low at $1,268.50 is now support and the bulls need to hold gold above that zone to maintain the near term bullish outlook. The 20-day moving average can also be used as an important short-term support zone.
Targets on the upside? The 100-day moving average (seen in green) at $1,297.70. Sustained gains above that moving average would be a strong bullish confirmation if that were to occur this week.
The short-term outlook has improved. The burden is on the bulls to maintain the rally. We'll just have to wait and see how far this current bull phase can run. This might be a situation to consider protecting profits with tight stops.
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By Kira Brecht, Kitco.com
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