Hi traders!
The violent selloff in Gold gives us a nice opportunity to look for a potential reversal.
What happened?
Gold has completed a larger Wave 1 with 5 subwaves. Many traders who believed this to be a wave 3 got caught by surprise - their liquidated longs may have contributed to the rapid crash.
Where do we go from here?
Since we can count an ABC correction (with an extended final wave C) it's time to set up our long. If we get that reversal here, the next logical move would be a wave 3 that takes us towards $2000.
How to trade it?
The .618 fib reversal has been reached. Additionally we can draw a trend channel that encompasses the entire wave 1 - look how the touchpoints align nicely. I have marked them with red arrows. This gives us a potential reversal level with an immediate long opportunity. Should gold fall further, we can take the second green box at .786 fib as a basis for an alternative potential reversal, because this level has the strongest volume profile support.
What if not?
Wave 1 retracements can be quite deep, technically they can retrace 99% of wave 1 without invalidating the count. However this would be a worst-case scenario that likely will not attract buyers so that we would have to expect a longer range without clear entry opportunities.
Thoughts on Correlations
Gold and DXY are inversely correlated most of the time, however this correlation can decouple. Also, a selloff in SPX/QQQ can help Gold to rise, as well as fears of inflation. Right now we see mixed signals:
+ DXY uptrend = pressure on Gold
+ SPX/QQQ potential down leg = supports Gold
+ inflation data = supports Gold
In order to get our reversal, we would need to see a pause in the DXY uptrend and possibly more pressure on the stock market. Check my analysis of the Nasdaq to see why I think that could happen.
Happy trading!
The violent selloff in Gold gives us a nice opportunity to look for a potential reversal.
What happened?
Gold has completed a larger Wave 1 with 5 subwaves. Many traders who believed this to be a wave 3 got caught by surprise - their liquidated longs may have contributed to the rapid crash.
Where do we go from here?
Since we can count an ABC correction (with an extended final wave C) it's time to set up our long. If we get that reversal here, the next logical move would be a wave 3 that takes us towards $2000.
How to trade it?
The .618 fib reversal has been reached. Additionally we can draw a trend channel that encompasses the entire wave 1 - look how the touchpoints align nicely. I have marked them with red arrows. This gives us a potential reversal level with an immediate long opportunity. Should gold fall further, we can take the second green box at .786 fib as a basis for an alternative potential reversal, because this level has the strongest volume profile support.
What if not?
Wave 1 retracements can be quite deep, technically they can retrace 99% of wave 1 without invalidating the count. However this would be a worst-case scenario that likely will not attract buyers so that we would have to expect a longer range without clear entry opportunities.
Thoughts on Correlations
Gold and DXY are inversely correlated most of the time, however this correlation can decouple. Also, a selloff in SPX/QQQ can help Gold to rise, as well as fears of inflation. Right now we see mixed signals:
+ DXY uptrend = pressure on Gold
+ SPX/QQQ potential down leg = supports Gold
+ inflation data = supports Gold
In order to get our reversal, we would need to see a pause in the DXY uptrend and possibly more pressure on the stock market. Check my analysis of the Nasdaq to see why I think that could happen.
Happy trading!