Thank you for joining us! Hang on and sit down for the ride of today’s analysis!
Yesterday we tweeted you the following question: “at what price level will Gold bounce to the upside?” Nathan Tucci responded by asking how high XAUUSD will go. Today you will get the answers for both questions!
As you can see on the week chart, the gigantic bull run between 2008 and 2011 has been replaced by a consolidation / huge sideways move ever since.
For traders who like swing trading, the big questions are: at what price level and when will the long-term uptrend continue and how high will the new highs be?
Let’s break it down and look at all the angles for XAU!
Patterns: The commodity pair is currently in the middle of a triangle (orange trend lines) after moving down consistently since hitting the upper line. A move down back to the bottom is definitely a strong possibility There we could see buyers push the price back up.
EW: In Elliott Wave terms the sideways triangle seems to equal a huge wave 4 consolidation (red 4). The wave 4 is clearly a corrective pattern. These patterns are harder to distinguish, but the current move down seems to be a wave C of 4 (orange C). The correction also might end sooner, but we will examine those options and support zones more closely on the day chart down below. After completion of the wave 4 we can expect the continuation of the uptrend.
Fib:. In some cases wave C’s can get quite impulsive of nature and there could be a small chance of breaking the bottom of the triangle. In that case pulling back deeper to, for example, the 382, 500 or 618 Fibonacci retracement levels are possible and those numbers will then act as support.
Oscillator: The oscillator is back to the zero line and it indicates that the retracement of the impulsive move up could be over and ready for an up move.
Price action: The move up (blue arrow) has an impulsive character. Relatively to that, the move down is behaving corrective (red lines). That favors a continuation to the upside without a break of the bottom and the swing low. It does not neglect the fact that the move down can correct deeply though before moving up.
XAU TARGET: Once we do get the uptrend continuation on XAUUSD, the chances are very high that we will retest the highs of 2011 at 1,920. After we break the top, a continued move towards the -270 target is expected. In any case, that would be my (1st) target! Price level of that Fib level is 2,250! Once we get the bounce it will be “easy” trend trading!
Now it’s time to zoom in!
On the daily charts we can clearly see lower highs and lower lows, which are forming a nice daily down trend and might have a 5th wave of C (purple) left to the downside.
BUT, we also have a huge week trend line acting as support when we connect the bottoms. We definitely need to break that single line trend line before shorting the market.
XAUUSD is at a bouncing or breaking spot right now. But buying the bounce off the weekly line is highly risky as the day chart is showing a strong downtrend. Waiting for either the break of the upwards weekly line (light blue) or a break of the downwards daily line (bright green) is recommendable!
If we do get the break of the weekly line to the downside, then I am targeting the 1,580 area as a bounce OR turning spot. Not only is there a 786 Fibonacci retracement of the move up, but also a 2 -618 targets of the wave A and wave 3 of C are in its neighborhood.
Thanks for reading! Please, let us know your opinion is on XAUUSD in the comments section?
If you have enjoyed the article, then please retweet it so that others can benefit from the analysis as well… much appreciated!