TECHNICAL ANALYSIS. Sell gold on rallies to $1,290-95/oz

Comex gold futures edged up on Thursday on a weaker dollar and equities plunged on soft Chinese trade data that stoked concerns about the health of the world’s second-largest economy.

Comex gold futures moved against our expectations. As mentioned earlier, a fall below $1,305 could postpone the bullishness, and dent the prospects of the uptrend. Since the price has broken the key support around $1,295-1,305 range, this will tend to cap any upside attempts.

Also, as illustrated earlier, the big picture is, however, still looking firm, which gives a feeling that $1,245-50 levels could hold attempts to decline and a bounce from there looks likely.

Though it briefly broke this support, it managed to close above $1,250, adding to hopes that a possible intermediate bottom is in place at $1,241.

However, an unexpected decline below $1,240 could lead it to towards stronger support around the $1,208-10 level subsequently. We are still hopeful of a recovery from here towards $1,295-1,300 levels in the coming sessions.

The favoured view expects prices to test resistance at around the $1,295-1305 zone while supports at around $1,245 hold for the week.

However, it needs to be seen if it can follow through higher from those resistances.

Only an unexpected rise above $1,320 on a closing basis could revive bullish hopes and such a rise will hint that the downward correction has ended.

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 levels 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 resistances and shown impulsive tendencies, we will now stick with the above count.

And 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 levels, 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 below the zero line of the indicator again, indicating a bearish reversal. Only a crossover again above the zero line could hint at a reversal in trend to bullishness.

Therefore, sell Comex gold on rallies to $1,290-95 with a stop-loss at $1,321 targeting $1,245, followed by 1,210.

Supports are at $1,245, 1,210 and 1,170. Resistances are at $1,295, 1,320 and 1,345.

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

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