Gold After The Bearish Break-out.

On 27th September, we were so firm on a bearish bias on Gold that all our forecast were pointing downside.
Two scenario we discussed in the last update on Gold gave us so much clue that price would more likely go downside than not.

In fact, for months, we have been talking bearish all the way.

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Price fell from the moment and later crashed to break out of the confinement.

We expect price to go as low as 1199 and maybe deeper.

Let's continue from the last updates.

Scenario 1.

Form 1375 where the bullish impulse move peaked, one would have expected a correction- which in this case is a zigzag with a triangle "(b)". The break out of this triangle is expected to be a motive wave . We expect price to correct upside to around 1302.5 (a retest of the break-out level) before the bearish move continues even stronger.

What IF the correction is not as deep as discussed and instead price goes sideway , we have another scenario to watch out for.

The "(b)" leg of the correction in this case is a flat pattern and price may have completed the first 3-legs of the resulting impulse wave. The corrective/consolidating rally could end at 1280 price region for an extended bearish move to 1199.

Price , of course, may decide to move in any other way; but we have clues and wait fro price to validate or invalidate.

The truth is- when price does validate, the effect is often profitable.

More updates to come later.

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GOLD: Conditions For Bearish Resurgence

Last month, we had a good chance to short Gold as we believed that there was a good impulse wave completion and a correction to 1200 in the medium term was very much likely.

Read Gold updates HERE

Price, of course did not get to our targets at 1300 and 1250. Price, shy of hitting 1300 rallied fast which could signify that the bullish move will continue and break above the resistance price @ 1375.

The chart below shows that the rally could be the correction of the bearish move from1375; talk of wave 2 or B of that degree.



Price is now at a very important zone where we usually see reversals. A terminating pattern, at least , is needed if the bearish movement will continue.

 The C-wave of this pattern can be seen clearly in the chart below.

 

The C-wave should not be taken as an ending diagonal. It will likely be an impulse wave with an extended wave 1.

For this pattern to hold, price should be rejected below 1361/2. Any move above that will be a big threat to the bearish resurgence.

We will watch for a break below the converging wedge-like impulse for a bearish opportunity. A good break below 1345.055 will be the first step toward the expected bearish resurgence.

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Gold Daily Update

In the last video review on Gold, we posted why we think that price will drop in the early period of trading using Price-Volume analysis and we seem to get it right.

Price ,held below 1375, dropped which gave us an opportunity to access our position ( we sold at 1355).

We therefore have a decision to make. Close our position or hang on.

We have this strong bias that price will fall to 1300 and 1250 at a very near time. We adjusted our SL to 1365 as we await which of the scenarios below will be satisfied.

Let me present two scenarios.
 
 

 The chart above shows a complete ending diagonal pattern with a truncated 5th wave. We have this some of the times and given that price is overbought, a proper break below will be required to join the bearish move.

On the other hand, price could rally as the 5th wave tries to break above the ending price level of the third to give an ''non-truncated'' 5th wave as the chart below indicates.



 The rally should be held below 1386 and 1390. Any break above will invalidate the pattern and we have to drop and re-analyze.

If price gets to this level, we will set other trading tools in motion as we be more aggressive in our entry in order to get a very good R/R,minimum of 1:3.

A conservative approach will be to wait for a proper break out of price below the diagonal support line.

Patience is required in trading and we will hope we have enough of it.

Please drop your comment, let's know your view. You can also post your own charts and we discuss together.

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Thank you and have a happy trading.