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Talking Points:
- Gold Technical Strategy: Flat, long setup identified
- Gold has ratcheted up to a new near-term high, and could offer top-side potential for trend resumption plays.
- The longer-term bearish channel currently projects to $1,240, and this could offer a top-end profit target for shorter-term long positions.
In our last article, we looked at the vigorous top-side price action being seen in Gold while the US Dollar melted down as a 2015 rate hike was getting priced further and further into the future (now it’s looking more like March-June 2016 for that first rate hike). As mentioned, traders should exercise caution as the five consecutive days of run higher had left near-term price action divorced from any nearby swing-lows; making it very difficult to line up risk management levels for bullish positions.
But over the past three days, we’ve seen prices moderate after a new short-term high was set at $1,191 on Thursday of last week, and this could open the door for trend-resumption positions in Gold.
Of specific relevance is the previous swing-high at the $1,170 region, and this is the level that we had mentioned as the ‘line-in-the-sand’ in our previous article. This price had given resistance two weeks ago, and was finally breached last week; but now is furnishing intra-day support in Gold, and this could be relevant for a top-side entry for those looking for trend resumption of the new bullish-trend in Gold. Traders could look to base stops below $1,161 (38.2% Fibonacci retracement of the most recent major move, taking the 2015 high/low), or $1,155 for a wider, more conservative stop (this is 61.8% of the ‘secondary move’ in Gold, taking the 2008 low to the 2011 high).
On the top side, the immediate target would be at the $1,189 region, as this is the near-term swing-high as well as being the 50% Fibonacci retracement of the most recent major move. After this, $1,200 becomes interesting (psychological level), followed by $1,217 (61.8% of the most recent major move), $1,225 (minor psychological level), and $1,240 (projected trend-line of 2+ year channel).
On the short side, traders would likely want to wait for $1,155 to give way to confirm that the bearish-trend may be returning. If $1,155 gives way, targets could be accorded at $1,127 (23.6% Fibonacci retracement of the most recent major move), $1,100 (psychological level), $1,087.05 (50% Fib retracement of the ‘big picture’ move taking the 1999 low to the 2011 high), and $1,071 (the 2015 low in Gold).
Created with Marketscope/Trading Station II; prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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