Introduction
As we all know, Gold futures have been in a solid uptrend this year as the Dollar has weakened. The main feature on the charts is the bull flag, which we have covered a few times in our technical analysis. The pattern has more than confirmed and is just over halfway away from the original bullish target we set a few weeks ago. The question here is if the long trade is over or if we could still look to take longs.
Let’s go over it all again…
Technical Analysis Overview
Volume
- The volume bars show consistent increases, particularly around the breakout of the bull flag, which confirms the strength and validity of the breakout. Strong volume on breakouts is a bullish signal.
Relative Strength Index (RSI)
- The RSI (14) is currently at 76.58, which is technically in the overbought zone (above 70), but the price continues to trend higher, which often happens in a strong bull trend. Overbought conditions should be treated cautiously, but not necessarily as a sell signal in a trending market. When a market is strongly bullish, RSI can remain overbought for extended periods.
Trade Setup for High-Probability Long Trades
Buy on Pullbacks
- Given the ongoing bull trend and breakout from the bull flag pattern, entering long on pullbacks would be a safer high-probability trade.
- Optimal Buy Zones:
- Near the $2,550-$2,570 range.
- We can also put on an hourly chart with a 20 or 50 moving average or wait for a deeper pullback on the RSI to take longs.
Target
- We are still looking for the $2,800 target. If we see a reversal in the form of a chart pattern, or bearish divergence on the RSI then the target would be invalidated in the short term.
Stop-Loss
- Aggressive stop-loss could be placed just below the $2,450 level.
- For more conservative traders, placing a stop below the flag formation ($2,350) is possible.
Conclusion and Trade Strategy
The Gold Futures market continues to show strength, with our bull flag breakout target of $2,800 still in play.
However, caution is warranted at these levels. For those looking to enter or add to long positions, this is how we see it possible:
- Waiting for pullbacks, particularly to the $2,550-$2,570 range.
- Using shorter-term charts to fine-tune entries.
- Implementing strict risk management with stops below $2,450 or $2,350 for more conservative traders.
While the trend remains bullish, stay alert for any signs of reversal. As always, combine this technical outlook with broader market analysis and disciplined trading practices. The gold rally may have more to give, but remember: in trading, preparedness and adaptability are key to long-term success.
