XULF Report 17th April
Gold is currently trading around $1380 some $60 off its low yesterday. Further evidence of subdued inflation and a strengthening housing sector in the US failed to prevent gold from making some gains in the aftermath of the yellow metals recent slaughter. The Bollinger bands on the daily chart highlight the overextension of gold’s descent and yesterday’s bullish harami indicates a reversal is probable. Given the aggressive sell-off predicting a retracement target is difficult therefore conservative estimates would be prudent in this current erratic period. Therefore target the 38.2% Fib level at $1423 as profit taking level for long positions. Before execution check a shorter timeframe to look for signals of a double bottom taking shape because it is likely price will drop slightly before going higher.
The 1 hour chart shows more detail regarding the steepness of the decline and the subsequent counter trend. Like investors and traders have seen many times in the past a double bottom can form before a sustained retracement fulfils its potential. Therefore be patient and wait for price to make a higher low before entering a long position. This will also enable a lower risk position as the stop loss will be place under yesterday’s low of $1321. Note the fractal indicator sell signal as well which can be useful
Wait for higher low for low risk entry
Fractal Indicator Sell signal
Drilling down into a smaller timeframe shows the 15 minute chart has developed a descending channel indicating a possible price decline before the retracement fulfils itself.
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