Gold had a promising start as it took out $1800s but faltered in the due course of the week due to a sudden spike in dollar index mainly caused by inflation fears/rising yields which triggered a selloff in equities as well. The previous low was broken quite easily suggesting that the double bottom pattern might have been a short term bounce indicator and not a fulfilling reversal pattern at the given time but still there can be a good chance that gold could gap up validating the double bottom pattern again as the expected stimulus got approved in the weekend which should not bode well for the dollar. Coming to the fundamentals, nothing absolutely nothing has changed rather jitters of another horrific first half of the year looms as virus has sprung back into full fledged action in many other countries as well prompting fresh lockdowns and other restrictions which could make the economic recovery agonizing again. Such a situation where fears/uncertainties have resurfaced even after vaccination itself suggests the required path of the yellow metal as it remains the safest haven amongst all asset classes. To watch next week – Powell speech and other important economic data.
On the chart –
Gold made a $50 red bar registering another low as the previous one unexpectedly didn’t provide much of a support to pursue the golden pattern of double bottom but gold still remains in the flag which is all the more important and the low registered might have been the bottom or in another perspective the metal likely still has more room to travel on the downside to touch the bottom around $1680-$1700 before a rebound. The whole story regarding failed double bottom can be retold as a successful validation if gold gaps up above the $1755 which is a probability as the expected stimulus got passed in the weekend. The break of low should not be considered as a short given the bullish pattern(flag) still holds and in fact a strong rebound is on the cards once the channel/flag low gets tested. We have 2 scenarios –
1. Gold closed above the support, till this is held it can go to $1740. If this is crossed it can move towards $1755. And if this is taken out it can rally to $1771.
2. Bears did get their share of the pie after the bottom broke and the price just skidded to the lows but it remained as a scalp than a positional given the bullish pattern of the flag still holds. Further short scalps towards the flag low can be expected.
Bullish view – Bulls had a wonderful start to week but gradually the greenery faded to an extent the low got broken in a brisker pace but all is not lost except the pattern of double bottom which too has a probability of being reinstated as a large stimulus got passed in the weekend which should be a not so good sign for dollar. For bulls the flag remains intact so the security of the longs also remain in place and the case could be the low of the flag/channel is already hit or in another view the scope for further correction remains limited to the flag lows of $1680-$1700 which if holds could see a sharp rebound towards the top of the flag. Fundamentally bulls remain buoyed as current situation across the globe is more or less mirroring the last year when the virus had started spreading while the technicals remains cautiously bullish as the support of the flag is looming around.
Bears can get some scalps towards the channel/flag lows as the broad trend remains bullish.
On larger terms, gold continues to remain bullish and prices are expected to head higher.
Possible trades are on both sides but mainly on upside, gold can be bought above $1741 for the targets of $1755 and $1771 with a stop loss placed below $1732. Longer term target $1789.
Dips towards support (and breakout region) can be used to create longs for the above mentioned targets.
Shorts can be useful for scalp trades only.
On the chart –
Gold made a $50 red bar registering another low as the previous one unexpectedly didn’t provide much of a support to pursue the golden pattern of double bottom but gold still remains in the flag which is all the more important and the low registered might have been the bottom or in another perspective the metal likely still has more room to travel on the downside to touch the bottom around $1680-$1700 before a rebound. The whole story regarding failed double bottom can be retold as a successful validation if gold gaps up above the $1755 which is a probability as the expected stimulus got passed in the weekend. The break of low should not be considered as a short given the bullish pattern(flag) still holds and in fact a strong rebound is on the cards once the channel/flag low gets tested. We have 2 scenarios –
1. Gold closed above the support, till this is held it can go to $1740. If this is crossed it can move towards $1755. And if this is taken out it can rally to $1771.
2. Bears did get their share of the pie after the bottom broke and the price just skidded to the lows but it remained as a scalp than a positional given the bullish pattern of the flag still holds. Further short scalps towards the flag low can be expected.
Bullish view – Bulls had a wonderful start to week but gradually the greenery faded to an extent the low got broken in a brisker pace but all is not lost except the pattern of double bottom which too has a probability of being reinstated as a large stimulus got passed in the weekend which should be a not so good sign for dollar. For bulls the flag remains intact so the security of the longs also remain in place and the case could be the low of the flag/channel is already hit or in another view the scope for further correction remains limited to the flag lows of $1680-$1700 which if holds could see a sharp rebound towards the top of the flag. Fundamentally bulls remain buoyed as current situation across the globe is more or less mirroring the last year when the virus had started spreading while the technicals remains cautiously bullish as the support of the flag is looming around.
Bears can get some scalps towards the channel/flag lows as the broad trend remains bullish.
On larger terms, gold continues to remain bullish and prices are expected to head higher.
Possible trades are on both sides but mainly on upside, gold can be bought above $1741 for the targets of $1755 and $1771 with a stop loss placed below $1732. Longer term target $1789.
Dips towards support (and breakout region) can be used to create longs for the above mentioned targets.
Shorts can be useful for scalp trades only.
Trade active
Comment:
First long target met at $1755