Gold Prices: Evening Star Urges Caution to Bulls
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- Gold Technical Strategy: Long, one target hit, two remain. Stop moved to breakeven on remainder.
- Gold prices have seen two days of softness, printing an evening star on the Daily chart (not confirmed until daily close).
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In our last article we looked at another long entry in Gold as the recent bull flag was seeing more aggressive top-side tests. The big question that we asked was rather this recent bout of digestion after a strong top-side move may be nearing an end; and given the breakout, it would appear that to be the case. But even with the prospect of another leg of bullishness, entry is of the upmost importance as we’ve traveled far away from the support that was being used to substantiate the stop on the previous setup. That level is at $1,200.41, and this is the 61.8% retracement of the ‘big picture’ move in Gold (shown in black on the chart below).
After a new short-term high was set yesterday at $1,262.60, we’ve seen some pullback in the move; and that pullback went even deeper today. This gives us an evening star setup on the Daily chart should today’s candle close near current levels, and given that this is a bearish-reversal formation, this could be just enough to caution bulls from jumping the gun on the long setup to, instead, wait for a cleaner entry.
For those that do want to push the top-side of the move, there are motives for support at current levels. $1,240.78 is the 61.8% retracement of the most recent move, and there is also a mid-line of a recently developed up-ward sloping channel (shown on the chart below in blue). Today’s price action appears to have given some bounce to this area of the chart, but it would still be too early to consider this support as being confirmed. Traders that do want to act on this setup would likely want to keep stops tight in the event of a deeper retracement. For those that are already long, this could be an opportune time to adjust stops to break-even on the remainder of the position.
Moving forward, confirmation of support in the $1,240 area could open the door for additional top-side entries, as could a higher-high/higher-low setup off of $1,251.74.
Created with Marketscope/Trading Station II; prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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