Introduction
Price Action Overview (Past Four Weeks)
Over the past few weeks, we see a strong uptrend with price action making higher highs and higher lows. This follows the standard theme this year for gold futures.
The price is currently approaching the R1 pivot resistance level (2744.5), which could act as a short-term ceiling. This level has not been tested since the last analysis, but it’s an important zone to watch.
Possible Scenarios
- Bullish Case: If the price successfully breaks through R1 (2744.5) and sustains momentum, there is potential to reach the target at 2824.2, and possibly R2 (2829.6). The bullish trend remains intact, with the 50-SMA and 100-EMA showing strong support beneath the price.
- Bearish Case: Should the price fail to breach R1 or form a reversal pattern (such as a bearish engulfing or shooting star near resistance), we could see a pullback towards the 50-SMA (2597.6). A break below this could lead to further decline towards the S1 level at 2538.5.
High-Probability Trade Setup:
Trade Setup 1: Continuation Long Trade
- Entry: A confirmed breakout above 2745 (R1). Ideally, the price closes above this level with increased volume, signaling strength in the breakout.
- Stop Loss: Below the R1 level at 2715 or a tighter stop below the most recent low prior to the breakout.
- Target 1: 2824.
- Target 2: If momentum remains strong and a breakout occurs, look to R2 (2829.6) as the second target.
- Risk/Reward: Ensure a minimum of 2:1 risk/reward ratio for this trade, especially considering potential whipsaws near resistance.
Trade Setup 2: Pullback Buy
- Entry: If the price pulls back towards S1 (2538.5) or the 50-SMA (2597.6). These levels could offer solid long opportunities in the case of a retracement, which would align with the uptrend structure.
- Stop Loss: Below S1 at 2500 for a more conservative trade.
- Target: R1 (2744.5) or the target of 2824.2, depending on the strength of the reversal.
Conclusion:
At this moment, bullish sentiment is clearly in control, but the price is nearing critical resistance at R1 (2744.5). This makes it a key level to watch, with the potential for either a continuation to 2824 or a pullback to S1 (2538.5) or the 50-SMA (2597.6) for a fresh buying opportunity. Traders should prepare for volatility near the resistance levels and monitor for breakouts or pullbacks before committing to a position.
