ICmarkets
Long

Very interesting price action on Gold...

FX:XAUUSD   Gold/U.S. Dollar
255 0 4
Weekly view: From a weekly standpoint, the trend on Gold             is still firmly south, and will remain that way in our opinion until price closes above the weekly trendline extended from the high 1488.0. Last week’s trading action, however, shows very little movement was seen, as price appears to be stranded in between weekly supply seen at 1223.1-1202.6, and a weekly demand area coming in at 1130.1-1168.6.

Daily view: Last week’s daily action reveals that price once again tested daily support at 1178.3 on Thursday, which as you can see, saw very little follow-through buying interest on Friday. This support has held firm on four occasions now, yet each time, including the most recent, no higher high formed, which in itself could suggest buying weakness. A close below this daily barrier would not be the end of the world for the buyers mind you, since daily demand at 1159.4-1170.8 (located just within the aforementioned weekly demand area) is lurking just below to save the day.

4hr view: Take a quick look back at the AUD/USD             and USD/JPY             4hr charts; the correlation to Gold’s recent price movement is near 100% at the moment! The only difference between these two pairs and Gold             is there are two possible Gartley patterns forming on Gold             at the moment, each with near-perfect symmetry. One has been colored in green – the bearish pattern , and the other in black – the bullish formation. The reversal zones which are shaded in yellow ( bearish zone 1207.6/1201.7, bullish zone 1172.7/1176.5) both comprise of a clear and distinct 0.786 retracement of X-A, an AB=CD pattern and a 1.272 extension of A-B.

We’re sure most would agree, with the right confirmation signal seen within either of these 4hr Harmonic reversal zones, there is a very good chance a reversal will take place. However, which one do we think will see action first? Remember, there can only be one if we keep to the correct alignments of this pattern. Well, with the daily timeframe suggesting weakness is forming in the market at the moment (see above); we’re favoring a move lower to attack the bullish Gartley’s reversal zone first. In addition to this, we’re also seeing consumed demand just below the closing price 1188.4. Check out the clear demand consumption tails seen marked with a red trend line at 1184.2/1181.5. These tails were likely sent south to fill unfilled buy orders to continue rallying higher, thus with little buy orders left here, price should theoretically be free to drop down to test the 4hr demand area at 1177.6-1178.6. At this point, you may be thinking, but price has still not reached the Harmonic Gartley reversal zone. And you would be right; this is a potential obstacle, but not a strong one. See how price has already attacked this 4hr demand area once already on the 1st of May at 1170.3, this has very likely weakened the buyers here and considering the overall size of this area, we will likely see a fakeout next time it’s visited. A fakeout into where???? Right into our Harmonic reversal zone!

Levels to watch/live orders:

• Buys: 1172.7/1176.5 (Predicative stop-loss orders seen at: dependent on where one confirms this level).

• Sells: Flat (Predicative stop-loss orders seen at: N/A).

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