Despite low volumes, equities remain bullish after a report showed that demand for US goods was better than expected. The positive news release provided a catalyst for stocks to keep making new record highs, while gold continues to slide and is currently testing the bottom of its recent trading range.
Price action on the daily-hour chart price is very near $1,265, which is the bottom of the trading range that has been in place since the beginning of April. The recent consolidation of the three key Simple Moving Averages (SMA) highlights a key turning point could help spark the next major wave down. Price also has tentatively broke down below the key triangle consolidation which could help trigger a move towards the 78.6% Fibonacci retracement of the December low to March high move.
Since forming a bearish ABCD pattern on May 5th, price has steadily sold off and we could see the next selloff occur if $1,265.40 is taken out. As long as price does not have a daily close above $1,310, the bearish bias will remain firmly in place.
The trade: Sell Gold at $1,280 with a stop loss at $1,315 and a take profit at $1,210. The Risk/Reward Ratio is just under 1 : 2
Edward J. Moya
WorldWideMarkets Online Trading