Technical Analysis

Sell gold if it rules below $1,268/ounce

Gnanasekaar T | Updated on January 09, 2018 Published on November 16, 2017

Comex gold futures edged lower on Thursday, as upbeat US economic data bolstered the possibility of the Federal Reserve raising interest rates next month and beyond.

Comex gold futures have been moving in line with our expectations so far, but the road ahead still does not look friendly. There is a lot of choppiness and it typically tends to happen before a trending move begins and in this case a downmove.

As mentioned in the previous update, failure to follow-through higher above $1,290 per ounce could once again dent the confidence of the bull camp. So far, price action indicates a possible intermediate bottom at $1,260 levels. But, any unexpected fall below $1,267 could easily drag prices to $1,245-50 levels. Strong initial resistances are around $1,287-92 levels. A close above $1,300 could suddenly open the upside again to $1,330-35 levels.

Unexpected decline below $1,265, on the other hand, could revive bearish expectations and longs to be abandoned strictly. Such a fall could see prices heading towards our potential bearish near-term targets around $1,240-45 levels again. The $1,240-45 is a very strong medium-term support and therefore, we can expect a strong bounce or a retracement from those levels in the coming weeks.

The favoured view expects prices to find strong resistance around the resistance levels mentioned above in the very short-term.

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. Subsequently, a corrective wave “B” could unfold with targets near $1375 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. But, failure to follow-through above $1,355 has dashed any hopes of any impulsive up move. As prices have broken certain important supports and shows weakness targeting $1,100 levels. But, a sustained move above $1,200 has once again revived bullish hopes and will make the necessary adjustments to the wave counts, as the prices break key resistance above.

RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still 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 below $1,268 with the stop-loss placed at $1,287 targeting $1,245.

Supports are at $1,270, 1,255 and 1,245. Resistances are at $1,292, 1,305 and 1,335.

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

Published on November 16, 2017
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