TECHNICAL ANALYSIS. Sell gold if it rallies to $1,175-80/ounce

Comex gold futures fell to their lowest since February on Thursday as a surge in oil prices boosted bond yields.

The futures moved as expected. As mentioned in the previous update, there is scope for prices to extend lower towards $1,171 per ounce levels, if it fails to hold support at $1,195-97. And, failure to hold support at $1,197-98 has turned into a strong resistance level, going forward.

As expected, we saw a decline to $1,165-70 levels. Resistance ios seen at $1,176-80 now. Bearish indications dominating the daily chart favour a fall to $1,145.

Only a daily close above $1,235 in good volumes could again revive bullish hopes and such a rise will hint that the downward correction has ended and the rally higher above $1,400 levels has begun.

In a broader picture, we expect the downside from here to be limited and a recovery to begin after testing the important levels mentioned above. But, it could potentially, take a while for a sustained recovery to materialise. The favoured view expects prices to edge lower, but one should be ready to abandon the bearish view if prices cross $1,235.

Wave counts: It is most likely that the fall from the record $1,925 to the recent low of $1,088 so far, was either a possible corrective wave ‘A’, with a possibility to even extend towards $1,025-30 or a complete correction of A-B-C ending with this decline.

Subsequent to this decline, a corrective wave ‘B’ could unfold with targets near $1,375 or even higher. After that, a wave ‘C’ could begin lower again.

Alternatively, we can also expect wave ‘B’ to extend to $1,476 levels. If the current decline as a whole from $1,920 can be considered as a fourth wave, then the fifth wave could begin and cross $1,700 in the long-term.

As prices have broken certain important resistance points and shown impulsive tendencies, we will now stick with the above count.

As mentioned earlier, once prices reach $1,025-45 levels we will look for any signs of reversal. There are signs of a turnaround, and prices have convincingly risen in volumes and closed above $1,300, which further reaffirms our wave count.

RSI is in the oversold zone now indicating that an upward correction is in the offing.

The averages in MACD are still below the zero line of the indicator again, indicating a bearish reversal.

Only a crossover above the zero line again could hint at a reversal in trend to bullishness.

Therefore, sell Comex gold on rallies to $1,175-80, with a stop-loss at $1,191, targeting $1,145-50.

Supports are at $1,160, 1,145 and 1,127. Resistances are at $1,200, 1,225 and 1,255.

The writer is the Director of Commtrendz Research. There is risk of loss in trading .

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