Overall uptrend is still supported as the price stays above MA50, but the latest momentum is bearish. Looks as if trying to test lower levels.
Last week’s engulfing red candle indicates that the buyers are still not strong enough above 1300. MA10 on weekly chart resisted the upward move, and now we are back at 1280 level to test MA20 once again. I think that this time MA20 support might be broken. The price needs to go further down to collect more long positions, the best candidate for the next low would be the intersection of weekly cycle low and MA50 around ~1245. Firstly, the low level_1260 of 6th October needs to be broken. Breaking this level will make a lower low, confirming resumption of the 1356-1260 downtrend.
Looking at the indicators: Lower line of the ascending channel (of 2017) on RSI indicator is just below to be tested. Breakout of the channel would mean re-visiting RSI-30 level below. Both the slow and fast stochastics favor downside move. Also, we have MACD cross as a further bearish signal.
Hi from Portugal, I am always learning from your analysis... please teach more...
fhsk2001
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A good point is that one can entry short at 1277 with SL=1283. What do you say about that?
CitRoN_RouGe
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@fhsk2001, Actually when I noticed the lower high 1290 on 4H chart, I opened short position at 1282. SL placed at 1310, just above the 1305 high. Of course this is my way: I prefer to be on the safe side, low position amount with larger SL margin. Risk reward ratio is almost 1:1.
For your idea I recommend to place SL a bit higher, $6 margin is a big risk. Gold daily volatility is $10-15$, and 6$ margin might be broken even during the session opening hours.
fhsk2001
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@CitRoN_RouGe, Thank you for the response. Actually to know where to put SL is very important. Above 1278 we have 0.618 fib (1261-1306) at 1279, 0.5 retracement (1204-1357) at 1281, 0.5 retracement (1261-1306) at 1284 and 0.382 fib (1261-1306) at 1289. We had recent retracement from the last level. Hence, SL=1293 should be OK. Meanwhile do you have any observations on which fibs are stronger and which fibs are weaker? And how to know if the impulse of the wave is enough strong to break a certain resistance/support?
CitRoN_RouGe
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@fhsk2001, In our current situation, I prefer to follow the Fibo levels of (1205-1356) leg mainly, as we don't have a higher high above 1356. (1356-1260) Fibo levels might be used as a complementary option, but still it is not confirmed whether this is a correction or downtrend to follow below 1260? But actually I do not take into account Fibo levels (1260-1305), we have a higher high at 1315 and (1260-1305) could not present any bullish strength, seems just like a minor correction of downtrend as of now.
CitRoN_RouGe
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@fhsk2001, And as to levels, my favorite is 38.2-61.8 combination, generally I take breaking of 38.2 as a confirmation for 61.8. Combinations of 38.2-50.0 or 50.0-61.8 are very rare. And I love to trade at 78.6, final point to resume or reverse direction dominates, which is a very good point to take long term position.
fhsk2001
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@CitRoN_RouGe, Thank you for the response. I learn from you. I followed fibs of 1204 - 1357 leg and 1357-1261 leg.
In the near-term past I can say that the trend had one retrace at 0.5 of (1357-1261) on 17.10.2017, one retrace of 0.382 fib of (1357-1261) on 18.10.2017, several retraces at 0.618 fib of (1357-1261) on 18.10.2017, 19.10.2017 and 20.10.2017 and number of retraces in the same period at 0.5 (1204-1357). Hence, the fibs of both legs are important and should be considered. To be honest gold had strong retrace from 0.618 to 0.382 fibs of (1257-1261) due to some fundamental event (Catalonia mess). Than, the gold passed very easy the both 0.5 of (1204-1357) and 0.5 (1357-1261), which shows that they are not very strong levels. It seems that 0.618 and 0.382 fibs are strong. We need to learn the strength of the different fib levels.