After peaking in February gold futures declined about 15%, largely reflecting expectations that the worst of the banking crisis and recession were near.Gold appears to have found a bottom, and higher prices may be coming.
The low for the selloff came on April 6 at 865.00. Last Friday and Monday formed a successful test of this low. Monday was especially significant, as it saw a strong rally away from 865. (I was watching this level; I figured a break below 865 would be a good breakout sale. It held instead, so I didn’t sell.)
Yesterday’s bar is circled on the chart; it was a breakout day. The Trade or Fade report shows us why; it was an inside day, and the narrowest trading range of the previous four sessions. The “Trade” day designation meant I was looking for a directional, breakout move today.
There were a number of points to use to launch a breakout buy. On the chart, you could have used yesterday’s high of 894.80 or Tuesday’s high of 896.40. First Trade or Fade resistance was 899.50, which lined up with round number resistance at 900. Any of these would have gotten you on board for this morning’s rally. The really gained steam when last week’s low at 902.10 was taken out. My first profit target was second ToF resistance at 907.60, which has been reached.
Going forward, I’d be careful tomorrow, as breakout moves often reverse themselves the following day. There are plenty of bullish signs, however.A close over 900 is bullish, and MACD appears in the early stages of a bullish crossover. The next resistance is the 50% retracement level of 917.50, which is roughly the middle of March’s trading range. Clearing that area could lead to a test of the March high at 970.
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