Gilts – Bearish Engulfing targets 116.91

19th August 2015

The market was unable to build upon Monday’s demand. Instead selling interest returned to Gilts Tuesday and a 4th down day from the last 5 resulted with prices retesting the 13 day moving average.

The failure to break that point introduces a strong note of caution into analysis. But price action formed a Bearish Engulfing pattern on daily candle charts.  A Bearish Engulfing signal very often signals a top in place and although this pattern was not formed exactly at a peak, it is near enough given other factors, that it is likely to exert an influence.

With this and momentum increasingly negative in the background we look for the decline to deepen with potential to 117.17 and 116.91.

Rallies are expected to be capped near 117.71 and the risk level is currently assessed as 117.99.

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It is worth pointing out the one technical factor that is a concern and that is the proximity of the 13 day moving average. This acts as a trend definer and has supported Gilts, on a closing basis, since July 21st. Obviously, at some stage it has to be exceeded but until that is clearly done, caution needs to be applied to any bearish forecast.

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