GOLD Elliott Wave Technical Analysis – 27th April, 2016

Gold remains within a consolidation. The question is: What direction will price break out? On Balance Volume is today giving an indication.

Summary: Gold is still range bound. On Balance Volume is today indicating the breakout direction is more likely to be up. It may now be just hours away. In the short term, a new high above 1,270.08 would indicate a possible upwards breakout underway. Full confidence would be had if Gold can print a strong green daily candlestick closing above 1,280 on increased volume.

New updates to this analysis are in bold.

Last published weekly chart is here.

DAILY ELLIOTT WAVE COUNT

Gold Elliott Wave Chart Daily 2016
Click chart to enlarge.

I am discarding the previous first daily chart in favour of this idea. At this stage, this idea has a better look.

Intermediate wave (2) may be a double combination with minor wave X ending earlier as labelled.

Minor wave W is a zigzag, the first structure in a double. The two structures in the double may be joined by a simple zigzag for minor wave X in the opposite direction.

Minor wave Y may be underway as an expanded flat correction or a running contracting triangle. Both possibilities must be considered. The first hourly chart considers a triangle and the second an expanded flat.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,046.27.

When intermediate wave (2) is complete, then the next wave up for intermediate wave (3) should be swift and strong. It must move above the end of intermediate wave (1) at 1,282.68. It must move far enough above this point to allow room for intermediate wave (4) to unfold and remain above intermediate wave (1) price territory.

A target cannot be calculated for intermediate wave (3) until intermediate wave (2) is complete.

If intermediate wave (2) ends in one more session, it would total a Fibonacci 34 days. Minor wave Y within it would total a Fibonacci 13 days. This is a reasonable expectation at this stage given that Gold’s waves often exhibit Fibonacci durations.

FIRST HOURLY ELLIOTT WAVE COUNT

Gold Elliott Wave Chart Hourly 2016
Click chart to enlarge.

If minor wave Y is a running contracting triangle, then only the final wave down for minute wave e is needed to complete the structure.

Within the triangle, so far minute wave b is a 1.2 length of minute wave a, minute wave c is a 0.92 length of minute wave b, and minute wave d is 0.57 the length of minute wave c. Minute wave d is reasonably close to 0.618 (often one of the triangle subwaves is this length). Minute wave d subdivides as a double zigzag. Minute wave e should be a single three wave structure, most likely a zigzag.

Minute wave e is most likely to end short of the a-c trend line. If it does not end there, then the other less likely position is for it to end with an overshoot of the a-c trend line.

Minute wave e may not move beyond the end of minute wave c below 1,227.39.

If price moves below 1,227.39, then the second hourly chart below would be confirmed.

SECOND HOURLY ELLIOTT WAVE COUNT

Gold Elliott Wave Chart Hourly 2016
Click chart to enlarge.

It is essential to always consider alternates when it looks like a triangle may be forming. What if the triangle does not end as expected? What else may be happening?

Triangles are very tricky structures. It is difficult to establish with certainty the beginning point until after the breakout from them.

Minor wave Y may be an expanded flat correction.

Within the expanded flat, minute wave a is a three wave structure. Minute wave b is also a three wave structure and is a 1.2 length of minute wave a. At 1,207 minute wave c would reach 1.618 the length of minute wave a.

It is concerning today for this wave count that minuette wave (ii) shows up as three daily candlesticks. However, this is still possible.

If price breaks below 1,227.39, then some confidence may be had in the target. At that stage, minute wave c may continue lower for a few days. Along the way down, there would be one more countertrend movement for minuette wave (iv) which must remain below minuette wave (i) price territory.

It is my decision today to no longer publish the alternate daily wave count because its probability is too low.

TECHNICAL ANALYSIS

Gold Elliott Wave Chart Hourly 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

The bottom line is price remains range bound and has been so since February. During a range bound market, price will swing from resistance to support and back again. It won’t move in a straight line and it may overshoot resistance or support before turning around and moving back within the range. The safest approach to a range bound market is to exercise patience and wait for price to breakout, and then join the trend. Only the most highly experienced traders should attempt to trade a range bound market; mean reverting systems are characterised by a few large losses and many small profits; it is more difficult to profit in a range bound market using a mean reverting system. Trend following systems are easier to profit from but require a trending market.

During this consolidation, it remains a downwards day with strongest volume. This indicates a downwards breakout is more likely than upwards. Overall, volume continues to decline as price moves sideways. For three days in a row now price has moved slightly higher on increasing volume. There was some support for the rise in price. However, volume for these three days is still very light.

ADX is flat today, no longer indicating a trend may be beginning, and indicating price is consolidating. ATR today agrees as it is declining. The market is consolidating; it is not trending.

On Balance Volume is my favourite early indictor of price direction for a breakout from a consolidation. Today the upper orange trend line is broken by OBV. There is a reasonable probability that this may precede an upwards breakout from price. This would fit perfectly with the first hourly Elliott wave count.

If OBV turns back down and moves below the orange line, then it would need to be redrawn and it would no longer be offering a bullish signal.

If OBV breaks below the light blue line, that would be a bearish signal.

This analysis is published @ 10:53 p.m. EST.

[Note: Analysis is public today for promotional purposes. Member comments and discussion will remain private.]

Continue reading GOLD Elliott Wave Technical Analysis – 27th April, 2016