Technicals | Nov 08 2018
Bottom Line 07/11/18
Daily Trend: Neutral
Weekly Trend: Up
Monthly Trend: Down
Support Levels: 1184 / 1167 / 1107 (new contract levels)
Resistance Levels: 1249 / 1278 / 1323 / 1390
Note: All prices refer to Comex futures.
Technical Discussion
Interesting to note are the reports that Central Banks have started making Gold purchases. Unlike trend traders who tend to wait for evidence of trends developing and prices rising on a more sustained basis, Central Banks have a history of buying early and off major dips, plus as a means of hedging U.S dollar exposure. On the flip side Macquarie Bank have come out saying 'soggy' gold prices look set to continue for the rest of the year with no real fundamental catalysts being in play to drive prices higher. Mind you there is only 8 weeks left before the end of 2018 so their outlook is clearly a shorter term one for now. Precious metals is always a market where fundamental opinion varies greatly. We will continue to stick to what the price charts are telling us so lets take a 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 1435 potentially reverting price to medium term bullish
'Clearly from a technical perspective, price action is remaining under bearish pressures. Shorter term if 1167 (new contract) can hold then there will be scope for price to head back towards the 1390 – 1435 supply zone ….. ' We continue to stick with this outlook and since our last review price did pop higher on the 11th October with some solid volume attached to the move. We had some follow through yet as you can see on our chart tonight, the rise post the pop higher has been overall choppy and uninspiring. Four sessions ago though buyers returned, yet once again the follow through has been virtually non existent to this point. So even though we continue to remain optimistic for higher prices short to medium term, the longer term outlook in our view remains clouded. We will only become more optimistic bigger picture if price can start to justify such a view. It's as simple as that.
All this said, what we are seeing here is not unusual at all for a market that has been under bearish pressures for such a long period of time. Simply put any recovery under such circumstances just takes time. Any swing higher from here and we could get hit with some Type-A bearish divergence although in our view its a weak example coming off such a low area of the indicator. So for now the move off the 1167 lows is clearly a-b-c corrective only, and this will only revert to something more potentially bullish if it can start driving higher with motive from here. There is plenty of overhead supply combined with the 200 day MA between 1300 & 1400, so until this zone can be overcome categorically, we will be continuing to tread with caution.
Trading Strategy
Our aggressive trade recommendation triggered so we are long at 1216 with stops originally placed at 1167 (new contract numbers). As mentioned in our technical section it's only been a stop start affair to this point, and even though we were looking for better post trigger, the trade continues to make progress be it at a slow pace to this point. The short to medium term trends have flipped to 'neutral' and 'up' respectively and this has provided us the opportunity to raise our stop to 1183 to cut down some risk. If price can swing higher from here there will be scope to finally get the stop closer to break even. It's a slow burner for now yet ideally we will start to build some better upside momentum over the coming weeks.
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Risk Disclosure Statement
THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.
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