The correction so far is unfolding as the main hourly Elliott wave count expects.
Summary: The correction may end in just one more day, if it is to total a Fibonacci thirteen daily candlesticks. One more day of sideways movement could see it end. The next wave up may be surprisingly short at only about $34 in length.
New updates to this analysis are in bold.
Last published weekly chart is here.
DAILY ELLIOTT WAVE COUNT
Gold has very likely changed from bear to bull.
So far, within the first five up, the middle of the third wave is now most likely complete. The strongest move may still be ahead. Gold typically exhibits swift strong fifth waves to end its third wave impulses. Look out for surprises to the upside for minute wave v and minor wave 5.
At 1,339 minor wave 3 would reach 6.854 the length of minor wave 1. When minute wave iv is confirmed as over, then this target may be calculated at a second degree. At that stage, it may widen to a zone, it may change, or a second target may be added.
Minute waves i, ii and now iii are complete within minor wave 3.
The pink channel is a best fit. Draw the first trend line from the highs labeled minute waves i to iii then place a parallel copy lower to contain the whole upwards wave. Minute wave iv may find support at the lower pink line. If price touches that line, it should offer a low risk entry point to join the upwards trend.
The main hourly wave count now expects a triangle is most likely unfolding sideways. Upwards movement is finding resistance at the lilac line and downwards movement is finding support at the (a)-(c) triangle trend line. To see how to draw the lilac line see the weekly chart here.
If the main hourly wave count is correct and Gold continues sideways to complete a triangle, then the following fifth wave may not be a strong extension and may be surprisingly short. Gold often exhibits very short quick fifth waves after its fourth wave triangles. The target for minor wave 3 at 1,339 may be too high. When minute wave iv is complete, if it is a triangle, then the target will probably be recalculated. If minute wave v is just 33.88 in length, which would be the most likely length, then at that point it would reach equality in length with minute wave i.
If the alternate hourly wave count is correct, then the lower pink trend line may be breached. Sometimes fourth waves are not contained nicely within channels; sometimes they breach channels.
Minute wave iv may not move into minute wave i price territory below 1,081.57.
MAIN HOURLY WAVE COUNT
This main hourly wave count expects to see alternation in structure between the zigzag of minute wave ii and the triangle of minute wave iv. This is the main wave count mostly for this reason.
Minuette wave (b) subdivides as a double zigzag. Minuette wave (a) may be seen as a single zigzag. Minuette wave (b) is less than 0.9 the length of minuette wave (a), so a flat correction is not possible as the minimum requirement was not met. A triangle may still be unfolding sideways.
The triangle may be a regular contracting or regular barrier triangle. The rule for minuette wave (d) is slightly different for each type of triangle.
If minute wave iv is a regular contracting triangle (more common), then minuette wave (d) may not move beyond the end of minuette wave (b) above 1,253.10.
If minute wave iv is a regular barrier triangle, then minuette wave (d) should end about the same level of minuette wave (b) at 1,253.10, so that the (b)-(d) trend line is essentially flat. What this means in practice is minuette wave (d) may end slightly above 1,253.10. This invalidation point is not black and white. This is the only Elliott wave rule which has any grey area.
I have found a fairly reliable wave length for triangle subwaves to be about 0.8 to 0.85 the length of the prior wave. This gives a target for minuette wave (d) to end about 1,245 – 1,247.
Thereafter, a small final zigzag down would be required to complete minuette wave (e) as the last subwave. It would most likely fall short of the (a)-(c) triangle trend line, but if it does not end there then expect it to slightly overshoot the trend line.
As soon as minuette wave (e) looks complete, and particularly if price again touches either the lower green triangle trend line or the lower pink trend line, that may offer a low risk entry point for a long position. However, if minuette wave (e) falls short of the triangle trend line, be warned that this line may not again be reached.
Stops may be money management stops or the Elliott wave invalidation point for subminuette wave (e) at 1,211.45. The risk to this wave count is that if it is wrong and the alternate is correct price may move substantially lower. It is up to each member to manage the risk to their account carefully. Conventional advice is to risk no more than 3-5% of your equity in any one trade.
This main wave count expects minute wave iv to find support at the pink trend line. It may end about the 0.236 Fibonacci ratio at 1,213.91. If it continues for a further one session, it may total a Fibonacci thirteen daily candlesticks.
ALTERNATE HOURLY WAVE COUNT
Minute wave iv may be continuing as a zigzag. This would offer no structural alternation with minute wave ii which was also a zigzag. For this reason, this must be an alternate wave count with a lower probability.
At this stage, if minute wave iv is continuing as a zigzag, then minuette wave (b) within it may be a triangle. This wave count no longer has the right look at the daily chart level. A single zigzag for minute wave iv should not have taken this long to unfold and it would be much longer in duration than the single zigzag for minute wave ii which lasted seven daily candlesticks. While a triangle could be expected to be longer lasting a zigzag should not be.
This wave count has a low probability, but alternates should always be considered for triangles. A new low below 1,211.45 would invalidate the main hourly wave count and confirm this alternate.
Click chart to enlarge. Chart courtesy of StockCharts.com.
A triangle pattern looks to be forming. The trend lines are drawn across the top and bottom of the pattern. This is a fairly reliable continuation pattern. The breakout should be up. If price breaks above the upper green line on a day with an increase in volume, that would be a classic breakout from this pattern.
A decrease in volume now overall for the last few days again gives this consolidation a more typical look.
ADX is flat to declining indicating the market is correcting. ATR is now again increasing, so it now disagrees.
Apart from the outlier of 16th February, highest volume is for an upwards day. The 16th of February may include data for the holiday session of 15th February for which there is no daily candlestick in StockCharts data. If this candlestick for 16th February is ignored, then the breakout direction indicated by volume should be upwards.
If the volume for the daily candlestick of 16th February is taken into account. then the breakout direction indicated by volume should be downwards.
On Balance Volume may be providing an early indication. It has broken above all of its trend lines. OBV is often a reliable early indicator for price. This supports the Elliott wave count.
RSI is neutral. There is plenty of room for this market to rise or fall. Stochastics has returned from overbought.
This analysis is published @ 07:24 p.m. EST.