Gold crashed over $30 in the past week breaking all supports broadly on account of Hawkish Fed minutes and better than expected data coming out from America. Incremental selling was visible from start of the week and there was no respite for the yellow metal as it continued its downward trend going below its long time support of $1208 but settled a bit higher above it. Weekly chart suggests a breakdown as the price failed to remain in the trading range of $1215-$1297 as showed here.
On the chart –
Gold was unable to hold into the trading range which is quite bearish and suggests further correction which now goes on to create an inverted W pattern on the weekly chart. Furthermore a Gartley’s pattern might be in play which may lead the prices even lower to sub $1150 levels. Circles denote the trading ranges, bigger one can still keep bulls in the game while the smaller one suggests a complete bearish party. We have 2 scenarios –
1. Long trades are not currently favoring the market sentiment except for any big event happening in Koren peninsula which might turn the tide and change the course of the gold or large buying at lower levels might give some impetus to the prices. If anything stated above happens gold can move higher to $1221 (A). If this level is crossed it can even climb higher to $1231 (B). And if this resistance area is conquered gold can move higher towards $1269 (C) which is very much unlikely in the current situation.
2. Decline in gold resumed for the 2nd straight week which was even more denser than the weeks before indicating lack of buying interest even at lower levels. Damage was done to the prices as good supports gave way briskly. With such selling pressure seen, gold can further move down to $1198 (1) where it will complete an inverted W pattern. If this support area fails to hold gold can slide lower to $1184 (2) which is a bigger support zone and also the end of the bullish circle from where the prices are expected to reverse. If this zone gives way, it can fall further towards $1169 (3). And if situations still remain bearish gold can even slide lower to $1147 (4) which is a possibility according to the Gartley pattern which may be on the play.
There is no long trades expected since Gold saw a complete breakdown of the supports, except for buying kicking in when the inverted W is completed or near the lower end of the bullish circle. Gold might go up in an adverse event of global tensions rising from Korean Peninsula else its clearly in a downtrend.
Bearish View – Bears were on top of their game as they eroded the prices over $30 and were able to break through critical supports and the ascending triangle formation. Every pullback was sold into indicating bearishness in the air. Once the $1240-$1241 mark was broken it never came back and selling intensified afterwards pulling the prices lower to break the circle support/trading range. If such selling continues gold can slide lower to $1184 where it is expected to find some support.
On larger terms, gold looks bearish with the prices expected to go lower towards $1184 and sell on rallies is advisable.
Possible trades are on both sides but largely on the downside, Gold can be sold under $1208 for the targets of $1198 and $1184 with a stop loss placed above $1217. Longer term targets $1169 and $1147. Gold can be sold on rallies with stops placed above $1229 or $1234.
Long trades are not the flavor but gold can be bought above $1217 for the targets of $1221 and $1231 with a stop loss placed below $1208. Longer term target $1251 and $1269. Gold can be bought near the supports of $1198 and $1184 with strict stops.