Why Gold Could Be Approaching a Trading Low Within Coming Months
Updated
Primary Chart: 2D Chart Showing Downtrend Parallel Channel, Fibonacci Levels and Major Support at YTD Low
Gold
XAUUSD could be nearing a tradeable low. The primary degree of trend remains bearish. Lower highs and lower lows on the daily and weekly chart appear. The downtrend channel on a log chart (or linear chart) has contained highs and lows since March 8, 2022.
Note the W-X-Y pattern on the Primary Chart. This is merely one potential EW interpretation of the price action in the downtrend this year. The Fibonacci targets are projections of wave W's length projected from the start of wave Y (which begins at the end of the rally in wave X). Note that other EW interpretations may be more appropriate. EW can often lead to multiple alternative counts that are equally valid. Further, EW can be incorrect at times because the wave counts on the shorter / intraday time frames are incorrect or ambiguous.
In any event, this particular target can be valid under the measured-move concept as well as EW principles. The measured-move concept is explained here.
The most conservative target is the YTD low at $1614. The next target is $1589 at the .618 Fibonacci level. The final target is where the yellow circle lies—$1400 to $1531 approximately. This could present a decent trading low for a rally into 2023. As with other targets presented by SquishTrade, each lower target is only viable and effective if the nearer target is claimed first. For example, the $1580 and $1400-$1531 targets are not effective until the $1614 target is reached and held (below). Further, each target presumes the downtrend remains intact. If the downtrend is broken decisively (not a whipsaw), then the targets are all invalidated.
Please consider the following additional technical analysis and perspectives from a well-respected author on this platform Tradersweekly:
Finally, as usual for SquishTrade's technical posts and targets, this target for Gold is not presented with an entry, exit or stop, and traders should consider prudent entry levels that make sense within their own trading system and risk parameters. Some traders only short at resistance, and some traders will only go long at major support. Time frame also matters. The reason no entry, exit or stop is provided is because this author wishes to leave those details—which depend in large part on real time reactions to price date—to each trader. The author does not wish to provide trade advice. Instead, the author prefers to offer only technical analysis that describes / analyzes the current price environment of various instruments and risk assets, which traders then may choose to consider along with their own research in applying their specific trading rules / system.
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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Gold
XAUUSD could be nearing a tradeable low. The primary degree of trend remains bearish. Lower highs and lower lows on the daily and weekly chart appear. The downtrend channel on a log chart (or linear chart) has contained highs and lows since March 8, 2022.Note the W-X-Y pattern on the Primary Chart. This is merely one potential EW interpretation of the price action in the downtrend this year. The Fibonacci targets are projections of wave W's length projected from the start of wave Y (which begins at the end of the rally in wave X). Note that other EW interpretations may be more appropriate. EW can often lead to multiple alternative counts that are equally valid. Further, EW can be incorrect at times because the wave counts on the shorter / intraday time frames are incorrect or ambiguous.
In any event, this particular target can be valid under the measured-move concept as well as EW principles. The measured-move concept is explained here.
The most conservative target is the YTD low at $1614. The next target is $1589 at the .618 Fibonacci level. The final target is where the yellow circle lies—$1400 to $1531 approximately. This could present a decent trading low for a rally into 2023. As with other targets presented by SquishTrade, each lower target is only viable and effective if the nearer target is claimed first. For example, the $1580 and $1400-$1531 targets are not effective until the $1614 target is reached and held (below). Further, each target presumes the downtrend remains intact. If the downtrend is broken decisively (not a whipsaw), then the targets are all invalidated.
Please consider the following additional technical analysis and perspectives from a well-respected author on this platform Tradersweekly:
Finally, as usual for SquishTrade's technical posts and targets, this target for Gold is not presented with an entry, exit or stop, and traders should consider prudent entry levels that make sense within their own trading system and risk parameters. Some traders only short at resistance, and some traders will only go long at major support. Time frame also matters. The reason no entry, exit or stop is provided is because this author wishes to leave those details—which depend in large part on real time reactions to price date—to each trader. The author does not wish to provide trade advice. Instead, the author prefers to offer only technical analysis that describes / analyzes the current price environment of various instruments and risk assets, which traders then may choose to consider along with their own research in applying their specific trading rules / system.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Note
As long as XAUUSD remains below the October 5 high, this forecast remains in effect. The bounce on Friday was contained by the downward TL as shown by the chart below. But further upside could put more pressure on shorts. Shorts have had a tough time with Gold over the past couple months as it has remained very choppy since reaching the $1600-1700 range. DXY will be important to watch going forward.Note
Please see the following chart:Given that the forecast above is longer-term (weeks to months), Friday's 3% rally should not invalidate the view. A break of the multi-month down TL on this log chart weakens the case, but whipsaws above down TLs this year have become the norm, so watch out for that before getting excessively bullish. We are also watching the resistance level at early October 2022 highs (pink rectangle on chart above)
Note
This chart is important for gold watchers. A break out of this bull flag to the downside could imply a bigger rally in Gold. This post took the position that within weeks to months, Gold could reach a low around $1467-$1589 before reversing at a larger degree of trend. That view remains valid as long as DXY does not break down. Currently, DXY's pullback remains contained in a bull flag / parallel channel as well as supported by uptrend support at the TL shown:Note
This outlook posted a week ago has not been working out super well. While the outlook was long-term bullish, SquishTrade (ST) provided some technical analysis suggesting that XAUUSD (Gold) would make one more good trading low before moving higher. Of course, shorting any asset near potential trading lows is not a good strategy, but this post was not a trade idea encouraging short positions near potential lows—instead, it was broader-view technical analysis meant to suggest a possible trading low that could lead to a bullish run in weeks to months. A bullish move has been occurring, but not from the levels ST suggested.
One of ST's targets (most conservative) was $1614, and price came close to that level, hitting $1616, but that was on the day of the forecast, so that doesn't really count! ST's targets based on measured move and Fibonacci analysis were $1467 and $1589.
In any case, gold reversed higher and the dollar continued pulling back not long after this forecast. At first, it appeared DXY would hold support at a multi-month uptrend, but that didn't happen.
Gold remains, however, right above key measured move and Fibonacci projection levels where it still could reverse higher in the next few weeks. So before closing this idea as a complete failure, ST intends to give it more time, especially since it was intended as a multi-month idea. Multi-month ideas need some room to work.
The idea is looking less strong, however, than it did at outset.
Lastly, some might ask why one would update a forecast when it's looking like it may be wrong, when it's becoming less accurate and potential invalid. It's important because all of us get trades and forecasts wrong. We have to be realistic about this fact to encourage the trading community, especially traders in their first couple years, who may give up not realizing that risk management, rather than their average win rate, may be their biggest issue.
Many of the best traders and fund managers in the world say: "It's okay to be wrong, but it's not okay to stay wrong." This is a principle worth following in trading, investing and market analysis.
Several of SquishTrade's recent posts and forecasts have worked well. It's important to note, however, when one's analysis or forecast does not seem to be working. Many frustrated traders may wonder at times why it seems social media is filled with near perfect trades—where are the trades that didn't win? It doesn't help the trading community to hide mistakes, does it?
Many high-profile trading services represent 90-99% certainty in their forecasts, with thousands or millions to be made practically overnight (w/in days to weeks). Sadly, these are false claims harm the public in order to collect fee or subscription revenue. At times, regulatory agencies have cracked down on some of the larger of such services.
Tradersweekly recently posted an extensive discussion of this sort of situation designed to remind the trading community to beware of such fraudulent and deceptive practices. It's worth reading, and here is the link:
Some of the best traders in the world have a 50-70% win rate but they manage risk exceedingly well. That's a topic for another day.
Rant over. Thanks for listening.
In the meantime, the gold forecast—a lower trading low before a bullish run—looks much less promising than it did a week and a half ago. But b/c the forecast is longer-term than most, DXY will be monitored and the idea will remain open for a few weeks more or until August 10 highs are taken, whichever occurs first.
Trade closed manually
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