It has been a pretty deep six month correction in OANDA:XAUUSD. The only valid interpretation of this corrective move in accordance with Elliott theory appears to be a double zigzag W-X-Y.
This double zigzag subdivides into two actionary zigzag waves A-B-C intervened by simple reactionary X, which is a corrective wave itself.
According to an introduced count, we have an impulse-triangle-impulse representation of both A-B-C sequences. Where B waves are both running triangles, implying subwave b going below the end of wave A, previous impulse low.
As OANDA:XAUUSD has completed another triangle (which always occurs in a position prior to the final actionary wave) inside an impulse wave C, we are going to have a 20 point decline to complete subwave v. As impulse C has 3rd subwave iii extended, I expect subwave v to be equal to subwave i, which is also equal the height of triangle in subwave iv. Thus we have to arrive to over target and long position entry point @ 1115.x
In a zigzag, the length of wave C is usually equal to that of wave A, although it is not uncommonly 1.618 times the length of wave A. This relationship applies to a second zigzag relative to the first in a double zigzag pattern. As one can see, we have closely approached this target @ 1120.x. Gold rarely bounce right of the targets, more common behavior is to penetrate a target and take one's stops out first ;)
I suggest to look this subwave v evolves, making an RSI divergence between subwave iii and subwave v. Daily RSI(14) have been in an oversold territory for a while, but the recent sharp move to 1223.x took it to 20 level and then it bounced back, creating a good opportunity to form a divergence. One can also take a look at 15m TF, count subwaves of this last impulse subwave v and spot some divergence between 3rd and 5th subsubwaves for more precise entry.
As a confirmation we have 78.6 retracement of the bullish move from 1046 low @ 1116.x and a longterm trendline from 2006 or 2008 local lows @1106-1122 area depending on what scale one use. CoT report also suggests the possibility of reversal as producers cut more then 60% of their net positions (which appears to be short) throughout this decline. Seasonality is also in favour of Gold after a New Year as the inflation picks up after a holiday/sale period.
For my first entry @ 1115 I'm going to place a stop around 1107, just below previous market structure extremums.
The target for this longterm trade really depends on where we are at. Either next up wave will be a wave C circled of bearish A-B-C circled correction or wave III braced of a bullish 5 wave advance. In first case wave C circled could be equal or a 1.618 v 0.618 product of wave A circled. In case of bullish wave III braced the target couldn't be set before we will see the subwaves developing.
I hope it isn't the case, but keep in mind a triple zig-zag correction, which is less probable but still possible, which could take us even below 1046 lows. Anyway now we need to bounce.
Trade safe, cut your losses short and let your profits run.
Cheers!
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@Bandarsq draw my attention to the following possible wave alternations here. It would be even better, and in accordance with wave length and price targets
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I believe Gold is in wave 3 of 5 wave final move down
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It became clear, as we start our final impulse with leading diagonal
Hi @wayusa, how is your the current EW count? I am a bit confused by this bull run. I am still looking for the final 5th wave down.
Thanks, and keep the good work!
wayusa
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Hi @trading4fun! Thanks for asking. EW count could be tricky at times. For me, the triangle in 1122-1142 range was a stumbling block.
In this case a triangle may have suggested that it is (from most probable to least probable case):
- a 4th wave within 5-wave motive C
- wave X in W-X-Y complex correction of previous impulse wave (1151 was an invalidation level in this case)
- a final wave Y of a double three correction (as shown in chart below)
Another possibility is that GC completed wave Y circled @ 1122. It means we are in another X wave right now and will have another down leg Z.
Personally, I do not believe in this scenario. Hedgers were buying into last two weeks' advance. Which is usually very bullish, as they tend to accumulate position when the price moves against them.
In a short-term I think we will resume trending higher from support @ 1169 or @ 1161 to 1200-1204 resistance area.
Have a good week!
BGLion
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@wayusa, thank you for the replay! What do you think about this count?
If this is the correct one, we could print the last leg down with LL.
BGLion
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If you look closly at the detailed COT report (tradingster.com/cot/futures/disagg/088691), you will see that only the Swap dealers and the small specs are buying this. This tells me that we are going to continue the down movement. You could check my personal COT indicator :)
postimg.org/image/bq27lgz21/
wayusa
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@trading4fun, in CoT report I actually look at the dynamics of Producers' positions only. I don't really pay attention to what other groups of traders are doing :)
wayusa
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@trading4fun, hey! Not really, it has a couple of mistakes. W and Y, if you name them so, should be corrective waves and subdivide into sequence of threes. And (W) is actually a three. Also wave (3) of 5 circled has only two impulse subwaves instead of three. Finally, current move from 1185 doesn't look like an actionary wave at all.