Strong bounce in Gold prices.

Gold price made a low at $1,721 but is now trading at $1,756. Has trend in Gold reversed to bullish or is this just another opportunity to sell Gold? We use the Ichimoku cloud indicator and simple technical analysis to reach a conclusion.

Green lines - Fibonacci retracement

Black lines- bearish channel

Gold price is trading still inside the bearish channel. Price made a strong upward reversal today but price has not exited the channel yet. The high that produced the $1,721 low is at $1,786. As long as price is below that level, short-term trend will remain bearish.

Again in the 4 hour chart we observe Gold price testing the Kumo (cloud) from below. Price is still below the cloud confirming that trend remains bearish. The $1,760-72 area is important resistance area according to the Ichimoku indicator. Price is trading above the tenkan-sen (red line indicator) and the kijun-sen (yellow line indicator). This is a sign of strength but not a reversal confirmation. Breaking above the cloud will be such a confirmation.

Concluding we see that price is testing key resistance area. This is not the place to be optimistic. A rejection here could bring sellers back and resume the downtrend to new lows below $1,700. Traders need to be cautious. A pull back should not break below $1,742 as this would confirm that bears remain in control of the trend.

The material has been provided by InstaForex Company - www.instaforex.com