Technical Outlook:

Gold had rallied through $1763 yesterday, before reversing lower again. The yellow metal is trading around $1751/52 as we prepare this article and is expected to drop further as long as $1765 remains intact. Immediate support on smaller time frames id $1740 and $1720 respectively, and a break lower would add further confidence on the bearish setup.

Alternately, a break above $1765 would change the existing bearish setup at least for the short term. We would re-analyse the counts and allow clear price action to develop before coming to a decisive plan. The long term structure would still remain bearish, as explained below.

Gold had rallied from $250 through $1920 in an impulse wave. Ideally, an impulse is followed by a 3 wave corrective structure. The most common corrections are Flat (3-3-5) and Zigzag (5-3-5). Please note that the drop between $1920 and $1046 was an impulse, 5 waves. Hence, the corrective structure unfolding is that of a zigzag.

It means Gold is on its way to produce a 5-3-5 corrective structure. It also confirms that the yellow metal should remain below $1920 and print below $1046 to complete the pattern. Digging further into the larger degree wave counts, the drop between $1920 and $1046 could be labelled as Wave (A).

The subsequent rally towards $1765 was in 3 waves, labelled as Wave (B). If the larger wave counts hold well, Gold should be preparing to drop lower below $1046 as Wave (C) progresses. Yesterday’s intraday high could be a lower degree wave 2, which has tested previous swing highs.

If prices manage to stay below $1765, a sharp bearish reversal awaits for Gold.



Trading Strategy:

Short against $1765, targeting below $1650, $1579, $1450 and lower.



Legal Disclaimer: This article is not investment advice. The data provided is for marketing material purposes and is not intended to confuse nor guide our clients on trading decisions. Any investment activity performed is perceived to be a self-directed decision. Exclusive Markets is not liable for losses that may occur because of a decision made after reading the information published on our research page or any other media.

Risk Warning: Trading the capital markets is risky therefore further knowledge and experience may be required. Apply appropriate risk and money management always and ensure the implementation of safe leverage.


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