Gold had another big week but this time on the downside abrogating the continued bullish trend by breaking through the support. The $40 week was an eventful one where the gold made a higher high at $1324 but eventually failed to capitalize by falling through $1300 with substantial ease testing the support at $1284-$1286 region credited to a rising dollar on account of better than expected economic data coming from America and continued turbulence in Euro and Pound due to Brexit woes. This signals a pause in the bullish trend allowing the bears to have some color.
On the chart –
Gold suffered a breakdown as the long term trend line was broken and the flag which was in formation since the gold started its upward rally from $1180s finally succumbed causing the atmosphere to turn bearish . A test of the breakout area around $1236-$1240 cannot be ruled out. We have 2 scenarios –
1. Gold finally broke down which for the moment abstains long trade apart from scalping unless the trend reverses and gold breaks out of the flag again.
2. Short trades come live after a long wait. Gold closed below the support line, till this is held it can move towards $1284. Once this is broken it can head towards $1274. If this is taken out it can sink further to $1260.
Bullish view – Bulls managed to create a higher high but failed massively as they were not able to protect the long term trendline which signals a pause to the green party. For bulls to reclaim the spotlight they need to break through the flag which is currently in making.
Bearish view – Bears find back their existence by breaking the support. The scenario is apt for the return of bears as globally risk on sentiment has gained a lot of steam forcing a flight from safe havens. For bears to continue with their assault they need to break the supports.
On larger terms, Gold has turned bearish and prices are expected to head lower.
Possible trades are on both sides, gold can be bought once it breaks out of the flag or at the bottom of the flag/channel.
Gold can be sold under $1289 for the targets of $1284 and $1273 with a stop loss placed above $1298. Longer term target $1260.
A sell-on-rallies can be useful under current scenario.
Reference: Trading View
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