Sunday, January 19, 2014

Gold Weekly January 20-24, 2014

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January has started with upward action. Still changes are shy here. Trend holds bearish. As on EUR, here I also have drawn new yearly Pivot Points. Appearing of 1361 Yearly PP could get special meaning from possible retracement point of view. It could become possible nearest upside target. Yearly PR1 is also very significant. We know that gold likes to re-test previously broken lows and consolidations. 1540 area is monthly overbought, YPR1 and low border of broken long-term rectangle. As market was strongly oversold, why it can’t reach overbought? This is very typical action for any market.
As another application of significantly oversold we’ve suggested retracement up. Thus, we’ve made an assumption of possible deeper upward retracement that could take a shape of AB=CD, and invalidation for this setup is previous lows around 1170s. In fact current move up could be the last chance for possible upward bounce, if, say, market will show something like double bottom. Currently price action is very suitable for that – W&R of first bottom. This action in general is very typical for double bottoms and fake breakout could be the first sign of possible retracement up. Bearish market has no other reasons to stop right here, since there is no support right now – it has passed through 3/8 support, it’s not at oversold. Currently we should keep a close eye on move up.
At the same time fundamental data, except physical demand and CFTC recent data do not quite support upward action, at least right now. May be a bit later situation will change, but market will enter seasonal bearish trend in February and it will be even more difficult to continue move higher.

Trend has shifted bullish here. Upward action couldn’t get solid momentum yet. Price move is very gradual. Initially we’ve thought that this could become butterfly “buy” pattern, but it also could be “222” Buy, since if we’ve suggested that AB=CD has been completed and W&R really has happened, this could be double bottom. Also take a look, we have solid bullish divergence with MACD. By treating valleys as AB=CD pattern we’ll see that minor extension stands almost right at Yearly Pivot Point, and 1.618 extension stands slightly higher than Yearly PR1. This is really interesting agreement. Weekly chart points that we should search possibility for long entry. Odds suggest that after AB=CD completion market usually shows at minimum 3/8 retracement, and on the weekly chart this will be not small move. This, of cause, makes sense only if W&R of 1180 lows really has happened. If we will be wrong with this suggestion then we will get the trap that we’ve discussed previously. Now as we can see, price has reached monthly PR1.
Almost every day of passed week we’ve talked about upward continuation by some technical reasons. On Friday this action has taken place and market has reached MPR1 and re-tested 1250 Fib resistance again. Our analysis still stands around possible H&S pattern. The first part of the pattern has been completed - price gradually is entering in our potential 1250-1267 resistance area. Following the shape of the pattern, somewhere around the creation of right shoulder should start. Thus, our major task right now is to understand where market could turn to the downside and if possible catch chance for scalp short entry.
Here we see that our suggestion about finalizing of wedge pattern seems correct and price finally has jumped higher with 4th leg inside the wedge. Thus, theoretically this pattern should finish around 1260-1265 area. This is combination of wedge border, WPR1, 0.618 AB-CD target and 1.27 extension of most recent swing down. May be you can find even butterfly here. So, let’s see how market will react on this resistance, since looks like this will be the key to whole H&S pattern.
Market is still working on possible solid reversal pattern on daily chart. Thus, it looks like major events will follow a bit later. But right now we already can see interesting agreement between possible upward targets and Yearly Pivots in long term.
Meantime, in shorter-term perspective, on current week we will watch reaction around neckline and if it will be possible – try to catch some bearish pattern for scalp short trade.

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