Gold (XAU/USD) is an interesting commodity right now, it has been providing huge market swings & offering a lot of potential for profitability. Let’s take an in-depth look at the technicals for gold right now
Long term outlook
Below is the monthly chart for gold, printed on is my long term outlook for gold.
I’m anticipating a leg to the downside, bringing us towards $1367 for a retest of a very significant psychological level. This region acted as resistance for 7 years, until the rally earlier this year broke far above, meeting $1560 at its highest point.
From the $1367 region, I’ll be looking for long term buys towards previous all time highs – that is of course if everything goes as anticipated, anything could happen in the long run.
Trade opportunities – Scaling down
Obviously we won’t be taking trade opportunities off the monthly chart, we would end up with 1000 pip stop levels. So let’s scale it down to the lower timeframes to find current trade opportunities.
Below is the daily chart for gold.
The chart shows a nice clear head & shoulders pattern at the peak of the rally from which we shifted down. A false break of the neckline support occurred, and now we are trading slightly above. This isn’t uncommon for head & shoulders patterns though, and they often remain valid regardless.
I’m looking for shorts off the 0.718 – 0.786 fibonacci region. $1505 > $1510 is the prime zone for me. We do of course need more clarity than this alone though, in order to secure a pin point entry.
Our hunt for scaled in confluences bring us down to the 4 hour chart, below:
Look how neat that descending channel is – we’ve actually just broken out, but I’m actually anticipating a false break to take place, and for price to return beneath the trend line after a tap of the target fib levels.
I will be watching the 4H & 1H charts closely at the fibonacci levels mentioned, in order to find a reversal signal & nail a pin-point entry.
Please be aware – without a VERY STRONG bear signal, such as a large pin bar candle or large engulfing with strong momentum, I will be avoiding this position.
I also won’t be taking this trade until after the weekend – Gold market gaps can be lethal.
For this position, I’ll be targeting $1445 as our primary take profit. We must be cautious of many psychological barriers on the way down, namely $1480. Partial profit taking can be considered if the position goes as planned on the run up toward this level.
As always, manage risk and trade safe!