Comex gold futures were higher on Thursday as the metal bounced back above $1,100 an ounce from the previous session’s five-year low. Comex gold futures are moving perfectly in line with our expectations.
As mentioned earlier, the bigger picture suggests downside pressure in the coming weeks. A close below $1,160-65 an ounce has opened the downside for gold futures. Resistances will be seen at $1,115-20 levels followed by $1,140-45 levels now. Pullbacks to the above mentioned levels could come under pressure and prices could eventually retest the lows at $1,085 levels or even lower to $1,045.
The question is, can prices reverse from above mentioned levels? Technically, an equality target is seen at $1,025 and another important one comes at $925. However, it does not mean that the above mentioned equality targets might necessarily be tested. Our favoured view expects the confluence point near $1,025-45 range to hold any attempts to decline and the prices moving up in a correction from there. However, only a convincing close above $1,145 accompanied by rising volumes could revive bullish expectations of a further move higher from there again.
Coming to the wave counts, it is most likely that the fall from the record highs at $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. Subsequently, to this decline, a corrective wave “B” could unfold with targets near $1,255 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. We are more inclined to go with this as a favoured scenario. If prices do cross-over above $1,435, then this possibility will be confirmed. In the short-term though, prices are likely to be under pressure and could edge lower towards $1,025-45 levels.
RSI is in the over sold zone now indicating a possible upward correction in the offing. The averages in MACD are below the zero line of the indicator, indicating a bearish reversal in trend again. Only a cross over again above the zero line could hint at a bullish reversal.
Therefore, sell Comex gold on rallies to $1,125 with a stop-loss of $1,147 targeting $1,076 followed by $1,045.
Supports are at $1,095, 1,075 and 1,045. Resistances are at $1,125, 1,145 and 1,160.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.