Gold's Three White Soldiers

Note the pattern that developed in the physical gold market over the past few days.

This three candle pattern is known as three white soldiers.

From Stockcharts:

  • Three White Soldiers: Three White Soldiers Candlestick example image from StockCharts.comA bullish reversal pattern consisting of three consecutive long white bodies. Each should open within the previous body and the close should be near the high of the day.

This is the first bullish pattern we have seen in the precious metal in some time.

With the bullish percentage index on gold stocks still at zero perhaps we will see follow through.

Note that the commercial net short has dropped to 23,000 this past week, the lowest level since 2003.  Certainly the stage is set for gold and the miners to rally.

The question is, how much and for how long?

The first stage of a rally is often sold.

If gold can gain some traction immediately, the first target would be the 20 day EMA and then the 50 day.

At some point, another sell off is likely before a base is established and an uptrend resumes after this long slump.

My current estimate is a rally to the $1325 to $1350 range before some consolidation and even a minor sell off to establish a higher low in the mid $1200s.

Perhaps a rally can then resume once the higher low is fixed and the 9, 20 and 50 day moving averages align - possibly in the September or October timeframe.