In this morning’s STI Watch List, I wrote that I thought today could be an important one for gold futures. I grabbed a daily chart to show you what my thinking is.
Below is the daily chart for February Gold futures. Last week saw a new low for the selloff on Tuesday, Wednesday had a breakout setup (inside day and NR7). This led to a breakout rally on Thursday, and a potential cause for optimism among gold bulls (gold bugs?)
click to enlarge
So that takes us to today. We had something for everyone today. For the bulls, 1109.10 is a 50% retracement of the selloff from the 12/17 high at 1142.90. Those that follow me know that while I don’t put huge stock in Fibonacci, I think the 50% retracement level is an important one for deciding whether a move is likely to extend or not. In this light, I thought a held trade over 1109.10 would mean that the bulls were likely to be willing to continue to buy at higher prices.
On the other side, today was a Taylor Sell Short Day for gold after two days of low to high intraday action. On a Sell Short Day, we watch for action around the previous session high. A move above there creates the “excess” high the Taylor Technique recognizes at a trend change (the end of a “buying auction” in Market Profile parlance). On a sell short day we enter short trades on the move back below the previous session high. Friday’s high was 1106.90. Today I was also using the 1109.10 level as another reference price for a short sale; a move back below there was likely to be a bull trap.
Thus far today gold has followed the Sell Short Day script. Last night saw follow through buying from Thursday’s strong performance; the subsequent selloff is typical action of a Sell Short Day.
Looking ahead, I see a couple of potential scenarios. 1099.50 is the first Fibonacci retracement of the recent rally; that’s also roughly at the psychologically pivotal $1100 area. With the trend for gold being down, recent action could be viewed as a bear flag. If that’s the case, if gold breaks below today’s low tomorrow, the bear flag would be confirmed. Further downside targets would be 1094.90 then last week’s low at 1075.20.
For gold bulls, I think the key is holding the $1100 area in the short run. Holding there could revive buying pressure, and open the door for another test of the 1109.10 Fibonacci resistance. Stay tuned!
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
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