GOLD: short term momentum regains confluence of mostly bearish support
The daily candle chart shows gold recently recovering (point 1) after breaking below a medium term bearish channel (point 2) and finding support near 1180.00 and then ascending a short term bullish trend line (point 1). The metal then proceeded to break above the resistance line of a steeper shorter term bearish channel (point 3) after regaining the medium term channel (point 2) where it is currently trading near 1330 (as of publication).
Considering that gold has managed to regain 3 support lines albeit 2 of them are medium term bearish ones, this indicates that less bearish momentum may continue as compared with the previous steep bearish momentum (point 5) as was discussed in a previous article in late June 2013.
If the current support line (point 1) can support the very short term bullish momentum, then gold may re-target the previous short term bullish support line (point 4) which could act as resistance.
However, if the current steep bullish trend line (point 1) fails, then gold may retest the bottom of the medium term bearish channel (point 2) or the upper line of the steep bearish channel (point 3) over the short term. Two additional charts are provided for very long term and short term perspectives.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @1349.00 with a Limit to take profit @ 1382.00 and a stop-loss to cut losses @ 1318.00 Risk/Reward Summary: Limit risk = +33 points profit / (-31) points Stop-loss risk = Gain to Loss ratio = 1.06
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1307.00, with a Limit to take profit @ 1271.00 and a stop-loss to cut losses @ 1333.00 Risk/Reward Summary: Limit risk = +36 point profit / (-26) Stop-loss risk = Gain to Loss Ratio = 1.38
Daily candle chart:
4 hour candle chart:
weekly candle chart: