Price moved lower as yesterday’s Elliott wave count expected.
Summary: The correction is incomplete. The target is either 1,278 or 1,263, with the lower target slightly more likely. The correction may end in one more day. This correction presents an opportunity to join the upwards trend. Risk is at 1,237.97. Do not invest more than 3-5% of your equity on any one trade, and always use a stop loss order. The target for the next wave up remains at 1,477.
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.
HOURLY ELLIOTT WAVE COUNT
Upwards movement for minute wave i fits as a completed impulse.
Ratios within minute wave i are: minuette wave (iii) is 1.06 short of 0.618 the length of minuette wave (i), and minuette wave (v) has no Fibonacci ratio to either of minuette waves (i) or (iii).
There is alternation between the shallow zigzag of minuette wave (ii) and the more shallow triangle of minuette wave (iv).
Minute wave ii may be unfolding as a double zigzag. The first zigzag in the double is complete and labelled minuette wave (w). The double is joined by a three in the opposite direction, a zigzag labeled minuette wave (x). The second zigzag in the double is most likely to be incomplete and is labelled minuette wave (y).
The second zigzag in a double zigzag has a purpose, to deepen the correction when the first zigzag does not move price deep enough. So if a correction (particularly a second wave correction) begins with a brief shallow zigzag, as this one did, then a double zigzag (or an expanded flat) should be considered. Here the structure cannot be a flat correction at this stage because the upwards wave of minuette wave (x) is less than 0.9 the length of minuette wave (w). It cannot be a B wave within a flat as it has not met the minimum requirement.
To achieve its purpose the second zigzag in the double should deepen the correction. It would be very unlikely to be over at today’s low as it would have hardly deepened the correction. The 0.382 and 0.618 Fibonacci ratios are reasonable targets for minuette wave (y) to end.
At the time of publication, it looks like micro wave 4 may be unfolding as a sideways triangle or combination.
Minute wave ii may not move beyond the start of minute wave i below 1,237.97.
Add a short term bear market trend line to the hourly chart. Draw it from the high of minute wave i to the swing high of minuette wave (x) within this correction. When price breaks above the cyan line, it would be indicating an end to the correction and a return of the upwards trend. When there is more structure within the correction, then a channel may be drawn about it which may provide an earlier indication of a trend change.
If price does reach down to the 0.618 Fibonacci ratio, then it would present a good entry point for a long position on Gold. At that stage, the risk / reward ratio would be 8.5 if the target at 1,477 is used.
Any positions entered here or in the next day or so must accept the possibility of losses. Sometimes I am wrong. The difference between those new to trading and professionals is risk management. Always manage risk carefully. Accept the possibility of losses and keep losses managed. Let profits run.
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 1.28 length of minor wave A. This is within the normal range of 1 to 1.38.
At 1,183 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 1,108 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. Price has moved slightly lower today but on a day with a slight increase in volume beyond the prior day. This indicates there may be a little more downwards movement to come.
The last three daily candlesticks technically complete an Evening Doji Star candlestick pattern, but it is weak. There is an overlap between the real body of the first candlestick and the body of the doji. The real body of the third candlestick only closes slightly into the real body of the first candlestick. There is light volume on the third candlestick compared to the first candlestick in the pattern. All these aspects weaken the signal from this pattern. It is my interpretation that this pattern indicates a pause to upwards movement rather than a trend reversal signal.
Price is turning and coming down to test support now that it has broken above resistance. This support line is fairly likely to hold. There are two support lines here: one at 1,280 and a lower one at 1,270. As price is now just above 1,280, it looks like it may move a little lower to about 1,270. If one more red daily candlestick prints with a low about 1,270 and exhibits lighter volume, then it would indicate a very likely end to this correction and a buy should be entered there.
ADX is increasing and the +DX line is above the -DX line. ADX is indicating an upwards trend is in place.
ATR today is flattening off, so disagreeing with ADX. The trend is interrupted.
On Balance Volume gave a strong bullish signal with a break above the orange trend line. OBV is now coming down to test support at that line. This should serve to hold price up at the resistance lines, most likely the lower one. This supports the main daily Elliott wave count and not the alternate.
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 still supports the main Elliott wave count. It does not support the alternate daily Elliott wave count.
This analysis is published @ 08:57 p.m. EST.