Gold has broken out of a consolidation upwards exactly as expected.
Summary: Expect price to keep rising while it remains within the best fit channel on the hourly chart. The target for this trend to end is at this stage 1,477. If the channel is breached, then draw a Fibonacci retracement along the first wave up and use the 0.382 and 0.618 Fibonacci ratios as targets for a correction. If price breaks below 1,237.97, then a downwards target would be 1,131.
New updates to this analysis are in bold.
Last published weekly chart is here.
DAILY ELLIOTT WAVE COUNT
Intermediate wave (2) may be a double combination.
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 a running contracting triangle. The triangle is supported by MACD hovering at the zero line here on the daily chart.
Within intermediate wave (3), no second wave correction may move beyond the start of the first wave below 1,237.97.
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.
At 1,477 it would reach equality in length with intermediate wave (1). This target is reasonable because intermediate wave (2) was very shallow.
If intermediate wave (2) is over as labelled, then it may have totalled a Fibonacci 34 sessions.
FIRST HOURLY ELLIOTT WAVE COUNT
There are at least two ways to label the subdivisions of upwards movement from the start of intermediate wave (3). I slightly favour this first hourly wave count because it has better Fibonacci ratios. Further, we should always assume the trend remains the same until proven otherwise, so use this first hourly wave count while price remains within the green best fit channel.
Expect the trend remains up while price remains within the channel. If price breaks below the lower edge of the channel, then use the second hourly wave count.
Within minute wave i, the first wave of minuette wave (i) is extended. Minuette wave (iii) is 1.06 short of 0.618 the length of minuette wave (i).
Because minuette wave (iii) is shorter than minuette wave (i), this limits minuette wave (v) to no longer than equality with minuette wave (iii) so that the rule stating a third wave may not be the shortest is met. This limit is at 1,313.
When minuette wave (v) is complete, then a five wave impulse for minute wave i would be complete. This would be indicated by a subsequent breach of the channel. When that happens, then draw a Fibonacci retracement along the length of minute wave i and use the 0.382 and 0.618 Fibonacci ratios as targets for minute wave ii.
Minute wave ii may not move beyond the start of minute wave i below 1,237.97.
SECOND HOURLY ELLIOTT WAVE COUNT
After trying several different ways to label this upwards movement, this idea comes from checking subdivisions on the five minute chart.
There are no Fibonacci ratios between minuette waves (i), (iii) and (v).
It is possible that minute wave i is over. Minute wave ii may correct to either the 0.382 or 0.618 Fibonacci ratios at 1,274 or 1,260. The correction may be more shallow than usual due to strong support from the consolidation.
Minute wave ii may show up on the daily chart as one to three red candlesticks or doji. It may not move beyond the start of minute wave i below 1,237.97.
If price does break below 1,237.97, then use the alternate daily chart below.
ALTERNATE DAILY ELLIOTT WAVE COUNT
It is still possible that intermediate wave (2) is not over.
Normally, the first large second wave correction within a new trend is very deep, often deeper than the 0.618 Fibonacci ratio. The main wave count sees intermediate wave (2) as very shallow at only 0.19 of intermediate wave (1). This is unusual. And so this alternate must be considered.
If any members have long positions on Gold already it is essential that stops are used in case this alternate unfolds. I have already moved my stop to break even. If the main wave count is right, then I will not have a profit but nor will I have a loss. If this alternate is right, then I can wait until intermediate wave (2) is over to enter long for intermediate wave (3), or possibly enter a small short position to ride down minor wave C.
Intermediate wave (2) may be an expanded flat correction. Minor wave A is a three, minor wave B is a three and a 1.20 length of minor wave A. This is within the normal range of 1 to 1.38.
At 1,176 minor wave C would reach 1.618 the length of minor wave A. This would be the most likely target. If price keeps falling through this first target, then the second target would be at 1,102 where minor wave C would reach 2.618 the length of minor wave A.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,046.27.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Upwards movement for Friday closed comfortably above prior resistance at 1,280 on a day with increased volume. This looks like a classic breakout from a consolidation.
After a breakout, often price will turn back down for a correction a few days later to find support at prior resistance. For this to have a typical look, price may be expected to move higher before turning down for a small correction which may end about 1,280. That would provide a perfect entry point to join the upwards trend if that is how price behaves.
For five days in a row price rises with increasing volume. The rise in price is supported by volume.
ADX is increasing and the +DX line is above the -DX line. ADX is indicating an upwards trend is in place.
ATR agrees there is a trend as it too is increasing.
On Balance Volume has given a strong bullish signal with a break above the orange trend line.
While the trend is up, the 13 day moving average may be expected to provide support for counter trend corrections.
RSI is not extreme. There is room for price to rise further.
This technical analysis supports the main Elliott wave count. It does not support the alternate daily Elliott wave count.
This analysis is published @ 04:10 a.m. EST on 30th April, 2016.