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Wednesday, August 12, 2015

Gold to go higher



It is obvious that gold has been battered in the last couple of months. However, most recent price action suggests that gold may rebound in the nearest future. In fact, the recovery has already started. I want you to look at the chart below to see for yourself. From 20th of July to 10th of August, 2015 gold has been in bottoming process. The last low on the 20th of July was quickly rejected as price crashed dramatically and then rose suddenly. 

In the next couple of weeks a process that traders call “accumulation process” occurred. You can see how price tried to test previous lows on at least 5 separate occasions and failed. Each time buying pressure came and price rose. On the other hand, price was also rejected at resistance. You can see how the range was “squeezed” during these couple of weeks. Narrowing range is a strong indicator that a break will occur sooner rather than later. It often presents the best opportunities for trading a breakout.

Most breaks fail and I would strongly advise against trading them. However, when you see a narrowing range it is one of those rare situations when breaks turn out to be true rather than false. This type of situation happened on the 10th of August when price eventually broke the narrowing range and now is rising up in waves. 

Just by measuring the base of the narrowing range pattern I assume that the minimum target for the move is around 1143 level (classical technical analysis count). Of course, price may go well beyond that and it is really difficult to say where exactly the rise will be over. However, a technical trader would at least try for the minimum target. Buying on dips seems to be the best strategy now if initial “buy on a break” strategy was not implemented. 

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Disclaimer
Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.