Commodity Blog

A bullish pennant pattern has formed on the four-hour chart of gold. Such pattern occurs when prices consolidate with ever decreasing volatility after a sharp rally. Being a continuation pattern, it is usually a sign that prices are gathering strength before resuming rally. The pattern supported analysts’ speculations that the commodity has bottomed out in the near term.

On the present chart, the yellow lines show the chart itself, with the sharp rally creating a flagpole, while sideways movement occurred inside the pennant. The cyan line is situated 10% of the flagpole’s height above the pennant and offers an entry point for long positions in case of an upside breakout. The green line is at the flagpole’s length above the pattern and provides a profit-taking objective.

You can click on the image to see a full-size version:

The chart was built using the ChannelPattern script. You can download a MetaTrader 4 chart template for this gold pattern. You can also trade it using the free Chart Pattern Helper EA.

Update 2018-07-09 11:36 GMT: Gold has performed a textbook example of a breakout from a bullish pennant pattern today at 5:16 GMT. The entry level triggered at 1259.94 with a stop-loss at 1255.41. The current risk-to-reward ratio of 4.78 looks very nice, but the take-profit level, which is currently at 1281.59, will continue to move down with the slope of the green line, dragging the R/R ratio with itself. Anyway, the trade is working out quite well currently:

Update 2018-07-10: Unfortunately, the strong breakout rally did not help this trade as gold tanked and hit the stop-loss at 6:19 GMT today:

If you have any questions or comments regarding this bullish pennant pattern on the chart of gold, please feel free to submit them via the form below.