Former resistance turns into potential support – and vice versa.
That’s Polarity 101. It’s a pattern found throughout the market. It doesn’t matter the asset class – Bitcoin or Berkshire. It’s simply human psychology at work.
These levels often mark missed opportunities. And, in the process, they create price memory that fuels increased activity. Traders and investors are driven to transact at these levels, highlighting supply and demand zones that act as support or resistance.
Why does this matter right now?
Because gold futures have sliced through near-term support, careening toward a level etched in the minds of goldbugs everywhere…
I’m talking about the 2011 highs!
Gold futures recently undercut a key level marked by the February pivot highs and last month’s pivot lows – a polarity zone.
The path of least resistance now leads to the downside as gold trades below the February highs at approximately 1,975.
Here’s the weekly chart of gold, highlighting those former 2011 highs at roughly 1,924:
Those former highs mark a critical level: gold’s peak during the last commodity supercycle.
Few investors traded at that level in 2011 due to the blow-off top. I imagine many wished they had, as those former highs have seen plenty of action over the past two years – mainly as resistance.
