Technicals | Mar 28 2018
Bottom Line 27/03/18
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 1307 / 1277 / 1247
Resistance Levels: 1378 / 1419 / 1488
Technical Discussion
Signs of an uptick in inflation in the U.S and an increasing risk of a stock market correction continuing to unfold medium term, should prove price supportive for Gold and precious metals in general. There does seem to be a disconnection going on between gold prices and U.S rate hikes though. Normally rate hikes would mean a strengthening in the U.S dollar and therefore a weakening gold price. Yet to this point the complete opposite has occurred, even with the Fed being hawkish on rates throughout 2018 and 2019 as a minimum. Interestingly though, and basis this common perception, data from Goldman Sachs reveals that for the past six tightening cycles, gold has actually outperformed post four of these rate hikes. Technically we are liking what could be building here now, so lets take a closer look.
Reasons to remain cautious:
→ price chart has been damaged bigger picture so any recovery will take time
→ larger cycle 61.8% retracement still holding at 1054
→ above 1378 potentially reverting price action to medium term bullish
1378 is the Wave-D high of the longer term triangle basing pattern breakout that we have been monitoring for what seems like an eternity. We continue to believe the fifth and final internal swing of this pattern within the Wave-E has locked in at 1247, especially with the response off this low point being impulsive in nature. So we have labelled the move as a Wave-1 or A high with the (a)-(b)-(c) move lower locking in pretty much to the tick on the 50.0% retracement zone circa 1307 low which we have labelled as the Wave-2 or B. Since then we've had a very positive upside reaction on some above average volume, and if this is a Wave-3 or C now in motion, we may well see buyers start to take control from here. Support has come in right on the 200 day moving average as well, and if our bullish medium term analysis comes to fruition, then it wont be broken below again for some time to come. Bigger picture the triangle breakout target is looking for 1705, with mini upside milestones needed to get us there then aligned to breaks above 1450, then 1598. It's over to you price action!
Trading Strategy
As per our formal recommendation and early entry trigger, we are now long Gold at 1341.50 with initial stops at 1301. We will continue to look for further upside momentum once the aforementioned Wave-D high is broken above circa 1378. This triggers the triangle pattern we have been monitoring longer term which then targets 1705 as mentioned. For more conservative traders 1378 on the immediate contract is also a suitable entry point to ride the next wave north. Price action still has plenty to prove here yet it's looking good at this very early stage.
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