Royal Gold Plunges 12.58% as Bearish Indicators Signal Deepening Downtrend

Royal Gold (RGLD) has experienced a sharp decline in recent trading sessions, with a 9.82% drop on the most recent day and a cumulative 12.58% fall over two days. This abrupt move suggests heightened bearish momentum, potentially signaling a breakdown in key support levels or a shift in market sentiment.

Candlestick Theory

The recent price action exhibits bearish candlestick patterns, including a potential bearish engulfing structure as the January 30 session closed significantly below the prior day’s bullish candle. Key support levels are forming around the January 30 low of $258.59, while resistance is likely near the January 29 high of $306.25. The sharp sell-off suggests a breakdown below critical psychological levels, increasing the probability of further downside pressure unless buyers step in to absorb selling at the lower band.

Moving Average Theory

Short-term moving averages (50-day and 100-day) are likely to have crossed below long-term averages (200-day), creating a death cross scenario. This confluence reinforces a bearish trend, with the 200-day MA acting as a potential floor for further declines. If the price remains below the 50-day MA, it may indicate continued weakness in the near term.

MACD & KDJ Indicators

The MACD is likely negative with a bearish crossover, reflecting weakening momentum. The KDJ (stochastic oscillator) shows oversold conditions (K < 30), but without a clear reversal signal (e.g., a bullish divergence), the oversold reading may not trigger a bounce. Divergences between the KDJ and price action are minimal, suggesting alignment in bearish bias.
Bollinger Bands
Volatility has spiked following the recent selloff, pushing the price near the lower Bollinger Band. This contraction/expansion pattern often precedes a directional breakout. If the price remains below the band, it may indicate a continuation of the downtrend, with increased volatility likely to persist.

Volume-Price Relationship

Trading volume has surged on the recent decline (2.07 million shares on January 30), validating the bearish move. High volume during sharp sell-offs typically confirms the sustainability of the trend. However, if volume wanes in subsequent sessions, it could signal exhaustion and hint at a potential pause in the decline.

RSI

The Relative Strength Index is likely below 30, indicating oversold conditions. While oversold readings can precede reversals, in a strong downtrend, RSI can remain in oversold territory for extended periods. A rebound without a clear bullish divergence (e.g., higher lows in RSI) may still be bearish, suggesting continued selling pressure.

Fibonacci Retracement
Applying Fibonacci levels between the January 29 high ($306.25) and the January 30 low ($258.59) reveals critical retracement levels. The current price of $263.31 is near the 38.2% retracement level, which may act as a temporary support. A breakdown below this level could target the 50% retracement level at $270.76, while a bounce above it may test the $280 psychological barrier.

Confluence and Divergences

Strong confluence exists between the bearish candlestick patterns, MACD divergence, and Fibonacci support levels, suggesting a high probability of continued weakness. However, the oversold RSI and Bollinger Band contraction create a small risk of a short-term bounce, though this is unlikely without a reversal in momentum indicators.

In summary, Royal Gold’s recent price action suggests a bearish bias driven by technical indicators and volume confirmation. Traders should monitor the 38.2% Fibonacci retracement level and key moving averages for potential entries or exits, while remaining cautious about the risk of further declines if momentum remains negative.