Gold: Nearing Bullish Support Line, Still Has Room To Go Lower Before It Reaches It Near 1215.00 In Near Term
The daily candle chart below shows the price history of Gold over the medium term. This Contract for Difference (CFD) aims to track the underlying spot price of the precious metal Gold, and last traded today near 1233.88 around time of publication following a close to the trading week.
Earlier this week in Ideas You Can Trade Gold was described as consolidating and a bearish continuation was drawn. Since then, that resistance line coupled with the failed support near 1256.00 prompted a sharp drop today from a session high of 1268.25 to a low 1227.58, a nearly 41.00 point swing in a single day.
While today's move is very bearish, support may exist just below current levels near the bottom of the bullish channel which coincides near 1215.00 in the very near term and which is the next down-side target for Gold.
If Gold recovers the support line of 1257.00 - which doesn't appear likely in the next few days - then a bullish continuation could be supported - but again seems less likely. Nonetheless, as volatility increases a large recovery could precede an even larger drop and thus requires appropriate caution after today's 40.00 point move.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1252.00 with a Limit to take profit @ 1264.00 and a stop-loss @ 1241.00 Risk/Reward Summary: Limit risk = +12.00 Profit / (-11.00) stop-loss risk = Gain to Loss ratio = 1.09
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1227.00 with a Limit to take profit @ 1214.00 and a stop-loss @ 1239.00 Risk/Reward Summary: Limit risk = profit +13.00/ (-12.00) Stop-loss risk = Gain to Loss Ratio = 1.08
Medium Term Daily Candle Chart: