Gold Approaches Key Support Level
Gold dropped more than 80 points on Friday 7th June due to a resurgent US dollar – taking the precious metal back to a key area of support. Let’s take a look at the various trading opportunities that may present themselves at this key level.
Daily Candle Chart Analysis
Gold’s daily candle chart is locked in a long-term uptrend with prices trending above the 200 day moving average (MA) since the turn of the year.
This is a simple yet powerful observation that should not be overlooked. Established trends take considerable time and effort to reverse, hence gold’s recent weakness may present an opportunity to position yourself within the long-term trend at attractive levels of risk/reward.
Past performance is not a reliable indicator of future results
Hourly Candle Chart Analysis
The hourly candle chart highlights the negative momentum which occurred on Friday – dragging the market back down into the key support zone. And with Monday’s price action stabilizing near support, swing traders are faced with three scenarios:
1. Break Above Hourly Swing Resistance: In this scenario, short-term momentum would realign with the long-term trend, potentially driving prices back to the top of the recent consolidation range.
2. Bullish Fakeout at Support: A break below support, followed by a quick rebound above it, would create a bullish fakeout. This pattern could trigger trapped shorts to cover, benefiting the bullish outlook.
3. Break of Support: Traders should also consider the possibility of a support break. To mitigate the risk of a fakeout, it’s advisable to wait for a daily candle close below support before confirming this scenario.
Past performance is not a reliable indicator of future results
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