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Ideas You Can Trade: Gold - Closes on Bullish Setup Under Resistance

Posted by Steven Hatzakis on Jan 17, 2014 4:27:00 PM

Gold: Closes Week on Developing Bullish Setup if Resistance Can be Overcome

The daily chart below shows the price of Gold over the medium term and having last traded at 1252.75 where it closed for the week in today's trading session that ended in New York.

Last time this Metals CFD was covered in the Ideas You Can Trade series, a mini-flash crash subsequently determined to be caused by an algo-gone-wild had caused significant volatility in a one minute time frame and caught traders by surprise. 

Since then, Gold has been steadily ascended a short term bullish support line, and has encountered pressure under a medium term resistance line which could reversal the momentum if not overcome. However, since the direction of the current trajectory is bullish, a setup looks to be underway for further bullish momentum if a continuation persists. The pair was also covered recently in the Today's Trading Edge series by WWM Technical Strategist Edward Moya.

Although we are already off fresh lows for the year made mini-flash-crash article mentioned above, a pullback could be swift if resistance on the line encountered today holds firm. This could be enough to reverse prices, and it doesn't seem to be just a coincidence that the high of today's session was on this line (note: line was drawn before today's chart was reached as can be compared with prior publications of Gold in this series). Although its nice to see trend lines sequentially become validate after having extended their trajectories into the future, however, this alone is not enough as the timing of events and trade parameters for entry/exits must also be considered. 

As the week has already wrapped up, the level near today's high of nearly 1255.00 will be of importance in deciding which way to play Gold as its direction could face a turning point at this junction, as markets set to open in the coming trading session.

Below are examples of how to trade a bullish continuation or a bearish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1255.09 with a Limit to take profit @ 1257.55 and a stop-loss @ 1253.33 Risk/Reward Summary: Limit risk = +2.46 profit / (-1.76) stop-loss risk = 0.76 Gain to Loss ratio = 1.39     

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1236.88 with a Limit to take profit @ 1235.10 and a stop-loss @ 1237.39  Risk/Reward Summary: Limit risk = +1.78 profit / (-0.51) Stop-loss risk = Gain to Loss Ratio =  3.49   

Medium Term Daily Candle Chart:

golddaily jan 17 2014 note

Longer Term Daily Candle Chart:

golddaily jan 17 2014 note longer


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