3 Technical Analysis Tools to Identify Resistance Levels on GOLD

9 Okt

How to trade Gold when it is constantly setting new all-time highs?

When Gold is trading beyond historical levels, technical analysis can help you to identify the next potentially strong resistance levels.

In this article, I will teach you the only 3 technical analysis tools you need to find the next key resistances and predict future correctional movements on Gold chart.

Tool 1 - Trend Line

The first technical analysis tool that will help you to identify a potentially strong resistance is a trend line based on previous highs.

Simply analyze the previous historic highs and try to find a trend line that was respected by the market at least 3 times in the past.

It means that such a trend line should be based at least on 3 historic highs.



Look at that rising trend line on Gold on a daily time frame. It is based on 3 historic highs, and it can be a potentially strong resistance.

Tool 2 - Psychological Levels

The second technical analysis tool is psychological levels.
These levels are based on round, whole numbers.



In our example, the closest psychological level is 2500 level. This level is based on round numbers, it is a multiple of 500 and 100.

It can compose a potentially strong resistance cluster.

Tool 3 - Fibonacci Levels

The third technical analysis tool is Fibonacci extension and confluence.

In order to identify a potentially strong resistance with Fibonacci extension, you should identify at least 3 last bullish impulses/waves.



Above is the example of 3 significant impulse legs on Gold chart on a daily.


Draw Fibonacci Extension levels based on these 3 impulse legs.

Here are important Extension levels to consider:
-1.272
-1.414
- 1.618



Above, you can see how I draw Fibonacci Extension levels based on all the impulse legs that we identified.

Your task is to identify the point where the extension levels of 3 impulses match in one point. Such a point will be called confluence zone.



This confluence zone will be the next potentially strong resistance.




These 3 technical tools helped us to identify the resistances beyond all historical levels easily.

Remember that there is no 100% guarantee that all the resistances that we spotted will be respected by the market.

For that reason, you should strictly analyze a price action and a reaction of the price to these levels before you open a short trade.

Alternatively, remember that these resistances can be applied as the targets for long trades.

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