Hello everyone, price action in Gold continues to be very strange and we saw a significant move to the upside after a bear trap formed below 2000. The move went directly to the 2088 resistance (and orderblock) and a correction from the local overbought conditions is likely.
The elliot wave count at this stage is very unclear, but I left my count on the chart. It's still possible to break down again towards lower price targets in the 19xx area. At this moment it's not clear at all for me.
I would like to see your comments and wave counts below, so feel free to share.
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If you have a look at the daily RSI on Gold, you'll see that it's at 97. It's the highest value since July 2020 and usually if the RSI closes higher than 95 on Gold a correction should follow very soon.
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2088 broke, but that changes not the overall assumption, that Gold will correct part of the strong move very soon. The problem is, that there are no strong level left on the chart to sell from.
The elliot wave count leads to be an impulsive five wave now and the correction would be a three wave move to the downside. We have to observe this very closely now.
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So far the trade idea is not fulfilled at all. I want to use this example to explain how I work with the RSI. The most common mistake is to just sell if the RSI shows a high level, the point is, that the market is overbought, but not ready the fall as the trend is clearly up. It's just a first indication, that the movement could be over soon. To trade safe, you need a clear pullback with a daily candle close that should be a bearish engulfing candle. The perfect setup to short from is when you get a daily candle close that reduces the RSI value from > 90 to < 60 within one day.
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After yesterdays move Golds RSI is now above 98. Be careful as price can easily create a new ATH now.
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First signs of seller coming in, but only on smaller time frames so far. It would be good to see a daily close with a huge wick and a bearish engulfing candle on the next day.
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The candle I was talking about closed on the 4H time frame. It's not a clear confirmation, because my indicator is made for the daily, but it could work as we also have a huge rejection in the daily candle. I will start with the first position, considering that the ATH area will be respected so far.
Fundamentals: DXY is showing weakness, but could form a rebound soon. The conflict in the middle east seems to be no longer relevant, but if a fire pause will be announced this could affect Gold again. News: Positiv expected ADP data (for DXY) tomorrow and Powell speech. If the data will be as expected or better, Gold will fall. Also the speech of Powell could end speculations about a rate early this year.
Indices are showing for a correction, BTC made a new ATH and could also form a correctional movement now. This could lead to a profit taking moment of smart money and institutional investors this week.
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Finally the Gold price reacted with a sell of to the higher than expected CPI data. It could be the beginning of a bigger correction, but there are questions about the overall structure. For an impulsive five wave move there is still one more wave missing, so this correction would only be a wave 4 and the price should turn bullish again in the 1940-1950 area. But it's also very likely that the bullish price action found it's top just below 2200, in this case the price should drop towards 2100 and 2080.
For an indicator based entry we have to wait for the daily close, because the indicator (RSI) is working with daily candle data.
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The daily RSI value dropped to around 50 within one day, which is a good sign, that a correction started. First target will be 2046.
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The price fell to the 1950 area again, which is a very good sign. Be careful with tomorrow, as the price Gold reacted very bullish on Fridays lately.
Trade closed: target reached
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The first target has been reached. I will take profit here with one position left for the possibility of reaching 2100 area.
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Second position hit Break Even. Still a good profit. Will close this idea at this point. There will be a follow up soon on my profile.
Elliot wave trader here my analysis tells me we could see a deep correction. These complex corrections can be tricky my triangle was invalidated once price moved above it so ABC pattern is more plausible, looks now to be completing the B leg in an expanded flat correction on the higher timeframe. can check my page for the chart analysis and good luck this week
Kyrean
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@bglockzin, Thank you. I checked you analysis and it's technically possible to see a correction like you draw. But we have to be careful, because the move from friday could also have been an early breakout.