- Gold is up 30% since November 2022 high.
- Inverted hammer formation on the daily chart presents short opportunities for bears and profit taking from bulls.
Technical recap
Gold has been in an uptrend for 2023 and is up nearly 30% since the November 2022 low. There is something that has put some fear into bulls for the time being, though, and it is a big inverted hammer on the daily chart.
Inverted hammer
This particular candlestick is extra powerful because of the fact that it has pierced through the previous higher high and immediately rejected to close below it. Let’s discuss what this candle is telling us.
Since GC has been making higher highs for the entire year, eventually, there will be some profit-taking, and the market is going to over extended. It seems that we are in that position right now. The inverted hammer that pierces through the previous high and rejects to close below the high is a very difficult candle for bulls to break back above, especially in the short term. It is also a great candlestick to short on because bears can set their stop loss above the high of the inverted hammer.
From here, I see it as a low probability that bulls will be able to push above this candle’s high, at least for the next couple of days. Unfortunately, this candle doesn’t mean that it is certain we will go lower, but if any traders are in long positions, it would be a good idea to look at taking profits here.
There could be a consolidation period for the next week or so. Traders have the choice to short this setup with no strict target, but a trailing stop instead.
