Read on TraderPlaner.com
by Cynthia Kase
With the first increases in interest rates in over nine years looming, and the dollar strong, and gold supplies reportedly healthy, especially in China, gold is looking especially weak. After a strong decline on Monday, it bounced a bit on Tuesday, so, is it time to “go for the gold”. While fundamental pundits are hazy, technicals can polish up the outlook.
The current spot low is $1072.45 as shown on the daily chart below. This price constitutes the “equal to” extension of the wave down from $1307.41, and thus is strong support. The big down day on Monday was followed by a star Tuesday, which is bullish. Daily momentum is oversold, but mitigated somewhat by the lack of divergence, a turn signal.
XAUUSD Daily Chart with Equal Waves, Harami Star, and Oversold Stochastic
The major line of resistance is a confluent $1145, the equal extension for the bounce up from $1072.45, and the trend terminus, 2*1.38, and Phi3 corrective projection for the last reaction wave, $1094.35 – 1109.8 – 1098.26. $1145 is the Kase DevStop3 on the daily chart and warning line on the weekly. Whenever there’s such correspondence, the confluent value increases in importance. $1145’s also the 10 day and four week moving average. So $1145 is unlikely to be overcome without a significant clarification from outside influences. If and when this happens though, the next big target is $1222, then next key extension and also the 62 percent retracement from the $1307.41 swing high.
On the downside, the chances of testing $1000 are highly dependent on whether support at $1045, $100 below resistance, is broken. If so, $1000 will have 2:1 odds.
$1045 is Kase DevStop4.5 on the daily chart, and $1000 on the weekly. $1045 is the lowest extension for the most recent wave down from Monday’s reaction high of $1119.10. Below $1045, targets from larger waves extending to $1000 are engaged. $1000 is the Phi2 corrective projection for the swing 1072.45 – 1119.1, and again for the swing 1142.7-1232.3.
Most importantly, the wave down from $1307.41 that has met its 1.0 projection at the current low, targets $1000 as its next, 1.38, extension.
For the optimists who went long on Monday or Tuesday, we’d suggest extreme caution until there’s a solid close over $1145. I’d use tight stops at previous swings around $1085 and $1075, but if you want to take more risk, $1065 is the critical target above $1045, and the key DevStop1 on the weekly.
If I were short, I’d stay short with stops at $1145 for now. This is about $70 up from the low. Should prices decline cleanly lower, I’d narrow my stop, first to $57, and then to $45, or use all three values for a scale-out exit.
Meantime, I’m expecting that if you keep your eye on the technicals, and are disciplined about exits, you’ll surely be golden.
Send questions for next week to askkase@kaseco.com, and for energy hedging visit www.kaseco.com.
