Gold, Silver and Oil Prices Heading Into Resistance

New York (July 27)  Gold, silver and oil have been rallying in July, but the overall outlook does not appear so rosy. The rally has pushed prices into descending channel resistance levels, which have sent prices lower in the past. With all three of these markets making some good-sized swings in 2017, traders will be watching to see if these commodities can break to the upside or if the pattern will result in prices sinking once again.

The United States Oil Fund (USO

Add To Watchlist) has been in a very well-defined descending channel going back to March. The top of the channel can be drawn across the last three price peaks, and each time the price has reached that level, a lower low (move to bottom of channel) has followed. On July 26, the price reached the top of the channel once again. The trendline should not be used as a trade signal – instead, traders will be watching for signs of a reversal near the trendline. These could include a strong bearish engulfing pattern or a consolidation followed by a downside breakout. If those develop, the target is the bottom of the channel, currently at $8.30. (See also: Why Oil Prices Are Headed Even Lower.)

Even if the price rallies above the trendline, that isn't a major concern at this point. As long as the rally stays below the prior peak (May) of $10.70, the downtrend remains in effect. Only if the price rallies above $10.70 would that indicate a possible reversal, at which point the bias would shift to the upside, making the next pullback a buying opportunity.

Source: Investopedia