THE LINE FOR GOLD CAN BE THE WRONG ONE AT THIS STAGE

Hello traders,

it is time to set some strategy ready for the week ahead. I start with gold, which is in my opinion a little too hyped by investors at the moment. In the LT I see it bullish, but, as per linked idea, Gold does not react to headlines as happened last week with FED bazooka and its bull runs happens at a later stage after easing monetary policies are announced. Indeed, in a positive scenario in the short-medium term, stocks and other instruments can grant much higher returns (if not coupons). Those instrument will be favoured first. In case of another bearish moment instead, gold will follow the SPX as it did inthe first two weeks of March, in a liquidity run. I tend to favour this second one, but you see that in any case, GOLD is doomed to go down for a while.

Anyway, let's go to the analysis.

There are Positive signals for Gold:
1- we are in the upper part of the two multiyear channels.
2 - we above 50weekly MA and 21weekly MA used as a support.
3 - Looking at the RSI, its lows and highs, we see we are without a doubt in a bullish phase in the MEDIUM-LONG term.
4 - On a daily TF, we are about to form a H&S of continuation of the trend.
5 - the price positively reacted at the fibo levels of retracement, bouncing and going out from the retracement area.

BUT ther are also negative:
1 - I see a lot (maybe too much) enthusiam on gold (you can see it from options pricing below);
2 - the price was rejected 3 times at 1700;
3 - we are at the very top of the two channels;
4 - and the RSI is showing a bearish divergence, like in 2006 and 2008 (circled in red), resulting in a retest of lower supports.
5 - XAUusd quotes 30points less than GC1!, a difference never seen before, meaning that it is more the managed money that is pushing the price higher by opening long positions.
6 - taking a look at COT, MANAGED money is heavily long (156k long positions vs 4k only short!), yet decreasing, whereas producers are heavily SHORT (283k net short positions)yet decreasing their positions. So the net value is respectively 150k long and 283k short, which is too much for both sides if we look at historical data. Of course producers net position is ALWAY short as they have to hedge, but a value of their positions that can indicate a bottom for gold is around 200k.

If we consider these graphical data, we have a mixed evidence, this is why we have to look for the bigger picture outside the charts. Otherwise it is like going blind. The V-shaped recovery was just due to a reaction to the FED announcements and does not convince me at all. I think that gold has to retest lower levels first to be ready for the run.

Looking at 6% otm options, we see that investors are skewed towards LONG positions, with C 1750 = 2400 usd and P 1550 = 950usd : that means that the call option is 2.5x more expensive even if we are at multiyear highs and almost any scenario tend to be against a further rise for the moment (as explained at the beginning). The long trade is simply too crowded to be right. And you know that I particularly reject crowded trades.

TRADE:
So, after checking the opening tomorrow, I will open a 1550 P Apr27.
T1 = 1550 (-5%)
T2 = 1450 (-10%)
Potential RR= 10x

Let me know what you think and if I missed something !

Trade active:

Entered a short position through the PUT 1550 @ 660 usd, much better than on friday.
- TP1 @ 1550 ( RR ratio depends on how much time will be left when the level is reached )
- TP2 @ 1450 ( 10,000 : 660 = 15x)

-SL when the value of the option fall below 400

Trade closed: stop reached:

Hi guys, this was a wrong call.
Even if I think I am right on the overall picture, the market does not think the same at the moment. Probably entered too soon. I closed the position and reconsider an entry from tuesday.