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Gold: Longer Term Upside

Technicals | Oct 21 2020

Bottom Line

Daily Trend: Neutral
Weekly Trend: Down
Monthly Trend: Up
Support Levels:  $1851 / $1788 / $1666
Resistance Levels:  $2090 (Dec 2020 contract)

Technical Discussion

Reasons to be bullish:
→ upside price action solid off the August 2018 lows
→ bullish larger bowl / cup and handle pattern continues to evolve bigger picture on the monthly chart
→ immediate corrective wave-(iv) may have locked in a low circa $1851.00

We are checking in on the weekly chart tonight which shows that the trend has been clearly to the upside since the mid 2018 lows were locked into place. We’ve labelled those lows as a higher degree Wave-[B]. With the Wave-[B] finally locking in via a basing triangle, which was post a multi year downtrend.

Using the weekly chart we are able to see how price has moved in impulsive fashion north for over 2 years now, which is a positive. And if our labeling proves correct then it is presently trying to complete a wave-(iv) of 3 to the upside. The wave-(iv) has certainly been taking its time to complete yet this is not unusual for wave-(iv)’s. As they do frequently form as complex patterns and can also be drawn out from a timing perspective. Which is exactly how this wave-(iv) is presenting on the weekly chart.

Some further interesting points to note more immediately. In EW speak, wave-(iv)’s cannot break into the highs of the wave-(i). So in this case if the wave-(iv) breaks below $1788, then the immediate minor degree count will invalidate. It will then be back to the drawing board in relation to where we are positioning the trend from a shorter term perspective. Bigger picture though is does continue to look compelling.

Trading Strategy

We are liking what we see here from a bigger picture perspective. Yet shorter term there is still plenty of hesitation going on. If you are a strong believer in the bullish gold story then buying the metal at $1940 would be a valid, be it aggressive, entry in our view. Yet we are not going to offer up a more formal recommendation just yet. That said it remains on our radar as we continue to look for a more convincing set up.

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).

This report may contain advice that has been prepared by The Chartist Pty Ltd (ABN 40 641 323 051). The Chartist Pty Ltd is a Corporate Authorised Representative (CAR No. 1282007) of Shartru Wealth Management Pty Ltd ABN 46 158 536 871, AFSL 422409. Any advice is considered general advice and has been prepared without taking into account your objectives, financial situation or needs. Because of that, before acting on this advice you should therefore consider the appropriateness of the advice having regard to your situation and your own objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. If the advice relates to the acquisition, or possible acquisition, of a product (other than a security e.g. a CFD) then the client should obtain the relevant Product Disclosure Document and consider it before making any decision about whether to acquire the product. Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.

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