Gold: Steep drop and lack of support nearby means prices could trade even lower
The daily candle chart below shows the price of Gold over the medium term, and trading near near 1246.48 around time of publication.
After failing to hold above 1300.00, Gold has traded lower in each of the last 4 trading days, with today's low of 1241.44 just off current prices as Gold is angled to continue downwards as the end of the trading week approaches -although just recovered slightly a few cents hours ahead of the close.
Without any major apparent support lines below current levels, 1180.00 could be the next key pivotal level where a strong reversal could occur, whereas in the very short term a series of small bullish "bounces" could follow before reaching lower, as Gold gradually descends, unless a faster drop such as that over the last few days continues.
In the last post about GOLD in this series, 1268.00 was referenced as a low- from April- that could be tested, and had since failed to reverse the drop, with the downward steep bearish channel (point 3 in magenta color on chart below) coming back into relevance.
If this steep facing drop is abruptly reversed, unless the medium term bearish resistance line (point 2 in red on chart below) is regained, in order to halt the speed of the fall, then such a short-lived bullish reversal would quickly turn bearish again. Therefore, unless a serious bullish reversal enables Gold to recover the bearish resistance line, its prospects are looking quite bearish in the very short term, and medium term.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1295.00 with a Limit to take profit @ 1310.00 and a stop-loss @ 1282.00 Risk/Reward Summary: Limit risk = +15.00 Profit / (-12.00) stop-loss risk = Gain to Loss ratio = 1.25
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1239.00 with a Limit to take profit @ 1227.00 and a stop-loss @ 1251.00 Risk/Reward Summary: Limit risk =12.00 profit / (-12.00) Stop-loss risk = Gain to Loss Ratio = 1.00
Medium Term Daily Candle Chart zoomed in:
Medium Term Daily Candle Chart: