Gold has continued bouncing within it's huge triangle on the Daily, a massive range of consolidation featuring a perfect series of Higher Lows and Lower Highs.
The further we get into the peak of this triangle the more explosive I expect the breakout to be. My last idea was to short the top of this range, and price did bounce down and continue the formation, reaching the bottom before bouncing back up again.
We've just had new CPI data showing the largest YOY inflation increase for 40 years. The general wisdom is that Gold performs well in periods of high inflation, and while the CPI data on Thursday actually saw a red day, the close of the week was a big green day for Gold.
From a purely technical standpoint, while I do believe a breakout will be coming soon my instinct is to continue trading the formation - that would be a short in this instance, with Gold price at the top of it's range, nearing strong resistance and having seen a potential End Of Week overreaction, with some rotation out of the US indexes on Friday as they took another dive.
However, the combination of the dramatic inflation numbers and a falling stock market is giving me pause. While I think there's solid potential for a 2 R short here with a stop above the resistance (marked yellow on the chart), I'm going to hold back until after NYSE open on Monday. I've been looking at this consolidation phase for a while now and there is almost a perfect storm brewing for a bullish breakout.
Note - I have adjusted the upper boundary of the triangle in the chart above, but in the range I previously drew in my last chart the Friday action actually drove up and closed above the upper boundary, signaling a potential breakout.
Previous chart idea -
The further we get into the peak of this triangle the more explosive I expect the breakout to be. My last idea was to short the top of this range, and price did bounce down and continue the formation, reaching the bottom before bouncing back up again.
We've just had new CPI data showing the largest YOY inflation increase for 40 years. The general wisdom is that Gold performs well in periods of high inflation, and while the CPI data on Thursday actually saw a red day, the close of the week was a big green day for Gold.
From a purely technical standpoint, while I do believe a breakout will be coming soon my instinct is to continue trading the formation - that would be a short in this instance, with Gold price at the top of it's range, nearing strong resistance and having seen a potential End Of Week overreaction, with some rotation out of the US indexes on Friday as they took another dive.
However, the combination of the dramatic inflation numbers and a falling stock market is giving me pause. While I think there's solid potential for a 2 R short here with a stop above the resistance (marked yellow on the chart), I'm going to hold back until after NYSE open on Monday. I've been looking at this consolidation phase for a while now and there is almost a perfect storm brewing for a bullish breakout.
Note - I have adjusted the upper boundary of the triangle in the chart above, but in the range I previously drew in my last chart the Friday action actually drove up and closed above the upper boundary, signaling a potential breakout.
Previous chart idea -
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