Gold's Rally Nears an Interesting Zone: Time to Lock in Profits?
From my perspective, XAUUSD has now reached a highly interesting zone. Two of my key criteria—channel projection and equal waves—are in play, which are useful when there's no previous price action traffic from the left.
Is this a short/sell zone? No, I don’t think so. Instead, it’s a prime spot to consider taking profits. If you've been wondering when and why to lock in some gains, the price action suggests this could be an ideal opportunity.
While shorting opportunities may present themselves, it will take time for the price action to develop and show signs of a potential downturn. The last time we saw a Lower Low on the Weekly chart was back in September 2022. So, jumping into a short position right now could be extremely risky. Even on the Daily chart, higher lows have been forming consistently.
To sum it up: this is not an area to short but rather an interesting zone to watch for future developments. If you’re uncertain, this could be a perfect point to take partial or full profits.
A Quick Overview of the Criteria:
Channel Projection – You may have heard that prices move within channels. Right now, we’re trying to predict the upper trendline of the channel as the price takes shape. Start by drawing the lower trendline, from wick to wick (or body to body). I’ve drawn mine using the wicks, marked with a red circle. Then, copy and paste it to the highest peak between the lower points. This gives us the channel projection. Feel free to try this on other charts and share your results in the comments!
Equal Waves – I call this method "equal waves," though others may have a different term for it. The idea is to measure major price swings. In this case, the first major swing was from near all-time lows to the 2011 high. After the correction, the second swing started in December 2015. Copy and paste the length of the first swing, and you’ll see it matches closely with the parallel channel’s projection.
Together, these two criteria have worked well for me to identify both buying and profit-taking zones. For example, I’ve applied them successfully to stocks like MMM, AMD, and NVIDIA.
Summary:
Gold (XAUUSD) has hit new all-time highs in six of the last seven months, breaking the $2000 level after years of attempts. Now, the price has reached an interesting zone for profit-taking rather than shorting. Two key technical analysis criteria—channel projection and equal waves—suggest it’s a strong area to consider locking in gains. However, it’s too early to consider shorting, as no clear signs of a downturn have appeared yet.
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