Short Term Breather For Gold

Technicals | Feb 26 2020

Bottom Line 25/02/20

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels:  $1542 / $1459 / $1409
Resistance Levels:  $1700 / $1923 (new contract)

Technical Discussion

Reasons to be optimistic longer term (short to medium term weakness possible):
→ upside price action looking robust off the August 2018 lows
→ Bullish 5-wave pattern now looking for a multi month breather ?
→ geopolitical risks / Coronavirus economic impact bullish for gold

‘As we keep reiterating, the run up to the 2011 highs circa $2060 we have labelled as a higher degree Wave-[A]. With the proceeding corrective move south being a Wave-[B] down to $1150. Post such a strong downtrend we then had the mandatory sideways basing pattern which finally broke out to the upside in June 2019.

So if this bigger picture labeling is correct, a higher degree 5-wave pattern to the upside is what we are anticipating longer term over the coming years for the Wave-[C]. With corrective [A]-[B]-[C] patterns a key price projection aligns wave equality. And in this case looking well forward, an equality move targets $2694.

Right here and now though, with Coronavirus market chaos putting a rocket behind the price of Gold, we do see the potential for an intermediate 5-wave pattern to have completed up towards $1700, or is very close to completing. If this is the case it means a higher degree Wave-(1) is locked in, and a decent three wave counter trend move for the higher degree Wave-(2) may be very close to starting. These waves typically lock in a 50.0% – 61.8% retracement of the full intermediate 5-wave move north. Such a pullback would also bring together a number of confluences between $1375 and $1475, including the horizontal support zone, and dynamic support in the form of the 200 day MA. A little hard to believe Gold could pull all the way back to here, yet anything is possible during these very volatile times. Regardless of short to medium term outcomes though, bigger picture precious metals, gold in particular, continues to look very bullish from a longer term perspective.

Trading Strategy

Our aggressive trade recommendation on the long side that triggered back in late November at $1476.00 is still alive and well, capturing the major part of this strong uptrend. With the latest surge north though, and basis the analysis as presented tonight, we have trailed our stop higher today up to $1601.00 to lock in some further profits. Lets see how it goes.

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

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