ICmarkets

Gold: Technical outlook and review.

FX:XAUUSD   Gold Spot / U.S. Dollar
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Weekly Timeframe: The weekly timeframe shows that price is now trading within a weak-looking weekly supply area coming in at 1255.2-1226.1. The reason we believe this area to be weak is simply because price has already visited this area once already on the 08/12/14, consequently decreasing the chances of a reaction being seen here. What is more, notice that the first reaction did not form a lower low which tells us that that Gold’s selling pressure may be diminishing.

Daily Timeframe: Yesterday’s trading action saw price once again pierce above the daily supply area at 1238.1-1227.7 (located just within the aforementioned weekly supply area) effectively forming back-to-back bearish pin bars. This will likely get the pin-bar enthusiasts extra excited and begin selling. This could work out, and price could indeed drop . We on the other hand believe that these recently closed pin bars have in effect cleared the selling pressure around the aforementioned daily supply area, which in turn has likely cleared the path north towards a daily Quasimodo resistance level seen at 1249.4 (last line of defense for the weekly supply area mentioned above).

4hr Timeframe: The 4hr timeframe shows that Gold recently drove prices higher into a 4hr supply area at 1244.5-1240.1 (seen just above daily supply at 1238.1-1227.7), which consequently saw Gold sell off. This informs us that most of the sellers are very likely consumed here now, and that the path north towards the aforementioned daily Quasimodo resistance level is potentially clear.

Our team has come to a general consensus that Gold will very likely rally. And as such, we intend to enter using a pending buy order set at 1224.3 just above a 4hr decision-point demand area seen at 1217.3-1223.4. The reasons for going in full tilt here and not waiting for confirmation are as follows:

1. Our independent analysis reveals selling weakness on both the weekly and daily timeframes.
2. The 4hr demand area sits just on top of a daily demand area seen at 1204.4-1216.5.
3. The 4hr demand area is also extremely fresh.
4. The low seen marked with a blue arrow at 1224.9 is begging to be faked into true demand. Imagine the stops sitting just below there just waiting to be triggered.
5. The risk/reward on this trade is over 4:1 if one targets the aforementioned daily Quasimodo resistance level .

Current buy/sell levels:

• Buy orders: 1224.3 (Predicative stop-loss orders seen at: 1216.6).

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