Gold has rallied up to the ceiling of a range it has been oscillating in since July. After touching this ceiling on Monday, it has pulled back. The trend is probably sideways and, given “the trend is your friend”, likely to extend in that direction.

The pair has rolled over after reaching a high of $2,477 earlier in the day and looks poised to start a fresh down leg within the range, thereby extending the sideways trend. A bearish Engulfing Japanese candlestick pattern has formed at the top of the range, and if the current 4-hour period ends as a bearish red candle, this will provide added confirmation of a short-term reversal lower. If so, the price will probably move down to $2,400 at the very least or perhaps the range floor in the $2,390s. Due to the fact the range is tapering slightly, it might also be a triangle pattern in the final stages of development. 

A decisive break above the range ceiling, however, would be required to indicate a more bullish trend was developing. Such a move would likely run up to at least $2,550, calculated by taking roughly the 0.618 fibonacci ratio of the range’s height and extrapolating it higher. 

A decisive break would be one characterized by a long green candle that pierced clearly through the level and closed near its high, or three green candles in a row that breached the level.