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.

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