Last week we initiated a Gold short on Thursday @ 1341.8 and price moved down for the rest of the week. In fact, Friday's candle crossed and closed solidly below the midline of the range. Monday continued the movement as price gapped down at the opening, closing at the cyan BB (1.0 Std Dev). Confidence in our sentiment was high.
Even though price moved up sharply and closed Monday's gap to start trading on Tuesday, price could not extend past the midline, reversed and created a beautiful outside down candle to end the day. The next day, Wednesday, was the only up day of the week but it was a weak candle as price clung to the cyan BB and hinted at more downside movement to come.
In addition, Wednesday was the only day where the 2 supporting indicators were temporarily out of sync. The Stoch RSI continued moving down but the On Balance Volume had a slight rise to the upside. This was short-lived though as both indicators got back in sync on Thursday which saw a second down outside bar in just 3 days. Price closed under the Cyan BB after briefly touching the next down Blue BB (1.5 Std Dev).
As trading started on Friday, and with my first Profit Target is 1305, I had fully anticipated price hitting that level before the end of the day. But try as price might, it was not able to push down and touch 1305. Although it was a good down day, price ended the week at 1310.2.
Outlook for Next Week
The big event next week is the FOMC on Wednesday. There is only an 18% chance of a rate hike at the moment according to industry analysts. While no rate hike would be seen as for Gold , I'd like to see gold move down to the big area of confluence at 1300 - 1305 to complete the downward cycle before potentially resuming the bull move up to new yearly highs. If you look at the chart, you can clearly see the lower Red BB, the 100 Day Moving Average and the bottom of this channel that dates back to 7/1 of this year all converging in this area. In addition, all cycle indicators are at the bottom end of their ranges. Is see this lining up for a few days of slow to moderate movement as price flatens out at the bottom and gets ready for the next leg up.
On the other hand, if Gold continues to move lower, we could see a breakout to the downside and the start of a new . This is supported by the weekly chart. Notice how price closed the week below the midline, a very sign. If a downtrend does continue, look for Gold to hit the Cyan BB @ 1276.4. This is my second Profit Target.
In any event, expect fireworks on Wednesday, regardless of what the news is. Trade the event, not the actual news!
Good luck and profitable trading!