The Fed begins its two day meeting today and tomorrow is Bernanke’s final press conference. We may see queues if the Fed will move in January and the markets will look to see if they will taper more rapidly. The transparency of what the Fed will do is hardly clear. Inflation pressures are well below 1.0% and not near the Fed’s threshold.
Gold at times can be one of the best financial instruments to trade the reaction from any major Fed event. Price action since the summer has traded between the low of $1,179.40 and $1,434, with the recent range over the last several weeks being much tighter. Price action is currently in between the 50-month and 100-month Simple Moving Averages. Major support currently resides at the $1,109.20 level.
As gold awaits confirmation of its next catalyst for the downward continuation of its longer-term bearish reversal, traders may see price creep up higher before sellers return. Price action on the 4-hour chart is highlighting a potential bearish Gartley pattern at $1,258. Sellers on the sidelines will welcome any signs of short-covering or knee-jerk bullish reactions over the next two days of trading.
The trade: Sell Gold at $1,258 with a stop loss at $1,272 and a take profit at $1,202. The Risk/Reward Ratio is 1:4
Edward J. Moya
WorldWideMarkets Online Trading