Gold prices found support yesterday near levels we highlighted on Friday. We highlighted the $1320 area as a price zone to keep an eye on and that if a bounce occurs, it opens the door for a break above the orange resistance line near $1348.
The price action from yesterday suggests the market has recognized the $1320 zone as potential support. Therefore, we will await a break higher on smaller term gold price charts to signal the market may be starting the bull run.
Zooming in to a smaller time framed chart, we can see a price channel has formed to the down side since September 6 high. We can use a break higher outside of this price channel as a signal to cautiously wade into the bullish waters.
A break above $1324 makes a move towards the September 12 high of $1332 higher probability. On a sustained move above $1332, the next level of resistance comes in near the orange resistance line near $1348.
If gold prices move below the blue trend line near $1302, then that suggests the near term bullish trend is over and a deeper correction is in the works.
If traders are going to entertain a break above the green price channel, start with small trade sizes then consider adding to the trade as each resistance level gets broken. A trader eventually builds the position and can be in a full position if prices succeed in breaking above the orange trend channel near $1348.
The trade is not without risk. Of course the blue trend line is the level when the idea is incorrect.
Trade sizes and leverage was one of the components we discussed in the Traits of Successful Traders research.
Learn how leverage affects trading results by downloading our TOST research.
Interested in a longer term outlook for Gold? Download our quarterly forecast here.
---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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