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Yesterday we Tweeted: “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 to both questions!
As you can see on the weekly chart, the gigantic bull run between 2008 and 2011 has been replaced by a consolidation / huge sideways move ever since.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 consolidations (red 4). 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 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 the 382, 500, or 618 Fibonacci retracement levels are possible and those numbers will then act as support.
Oscillator: The oscillator is back at the zero line and it indicates that the retracement of the impulsive move up could be over and ready for an up move. Read more about Bill Williams Awesome Oscillator.
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 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 toward the -270 target is expected. In any case, that would be my first 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 downtrend 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 recommended.
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! Let us know what your opinion are on XAUUSD in the comments section.
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