TECHNICAL ANALYSIS. Sell Comex gold if it touches $1,105-1,110/ounce

Comex gold futures were lower on Thursday as prices hit a one-month low and remained depressed awaiting more clarity on the outlook for US monetary policy from Federal Reserve officials speaking later in the day. Comex gold futures moved in line with our expectations.

As mentioned in the previous update, the $1,110-1,117 an ounce range, a critical support has given way and this opens the door for a retest of recent lows at $1,077 or even lower to $1,045. While resistances at $1,115 followed by $1,140 caps, favoured view expected a decline and retest recent lows or even lower. Prices have declined as expected, but it is yet to break the recent low at $1,077 despite strong bearish signs.

There could be a mild pullback higher towards $1,108-1,110 before the decline resumes again. Only an unexpected rise above $1,124 could tone down the bearishness to some extent allowing the correction to extend further higher, which might again be short-lived considering the stronger dollar picture noticed in the charts. Favoured view expects an eventual break below $1,077, while resistances in the $1,115-20 caps any attempts to rise.

We will take a look at the wave counts now and understand the possible scenarios that can unfold going forward.

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.

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.

As prices have broken the key $1,140, we will now abandon this count. And as mentioned earlier, 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 oversold zone now indicating that a possible upward correction can be seen.

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

Only a cross over again above the zero line could hint at a reversal in trend to bullish.

Therefore, Sell Comex gold near $1,105-1,110 with a stop-loss of $1,126 targeting $1,078 followed by $1,045.

Supports are at $1,095, 1,077 and 1,045 and Resistances are at $1,120, 1,138 and 1,155.

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

COMMENT NOW