Price moved slightly lower, which was allowed for but not expected from yesterday’s analysis.
Summary: This looks like a good set up now for a long trade on Gold. Price has broken out of a consolidation on increased volume, now turned down to find support at prior resistance. The probability is high that price will bounce up from here; the Elliott wave count expects a third wave of a third wave upwards. The target is at 1,477. Risk is at 1,237.97. Members may enter long now, or may choose to reduce risk a little further by waiting for the channel on the hourly chart to be breached by upwards movement and possibly also price to make a new high above 1,286.04.
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.
Minor wave 2 may not move beyond the start of minor wave 1 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
This is the best labelling I can see for minor wave 2 so far. It may be a complete double zigzag.
Within the first zigzag labelled minute wave w, minuette wave (c) is 2.41 longer than 1.618 the length of minuette wave (a).
The double is joined by a three in the opposite direction, a quick zigzag labelled minute wave x.
Within the second zigzag labelled minute wave y, minuette wave (c) is just 0.53 short of equality in length with minuette wave (a).
The different lengths between A and C waves within the double exhibits alternation.
Minuette wave (c) may still move lower within minute wave y. The best fit channel (lilac) needs to be breached to indicate this movement is over. A new high above the start of minuette wave (c) at
1,280.21 *edit: 1,286.04 would provide some price indication that downwards movement is most likely over. At that stage, upwards movement could not be a second wave correction within minuette wave (c), so at that stage minuette wave (c) would have to be over.
While there is no trend channel or price indication that downwards movement is over, the risk that price could move lower must be accepted.
A new high above 1,303.51 would invalidate the alternate daily wave count below and provide confirmation of this main wave count.
Any members entering long here are reminded to manage their risk carefully. It is the single most important aspect of trading, so it bears repeating. Do not invest more than 3-5% of your equity on any one trade. Always use a stop loss to close the trade if the market moves against you. Even a high probability set up like this one can go wrong; the risk of a loss to your long position must be accepted and must be managed.
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 moved my stop to just below 1,237.97 to give the market room to move, and my position is only about 2% of my equity. If the main wave count is right, then I will not have a profit. If this alternate is right, then I will have a small loss and 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.
The last five days’ price action looks like a classic breakout from consolidation, followed by a back test to support which was previously resistance. This is my favourite high probability trade set up. Entering long here still has the risk that price may reenter the consolidation as sometimes happens.
Volume increased as price moved higher to the last high. The rise in price was supported by volume. Now as price moves lower volume and range decrease. The fall in price is not supported by volume, and the decrease in range makes this small downwards movement look corrective.
ADX is still slightly increasing. The +DX line is above the -DX line, so ADX indicates an upwards trend is in place.
ATR is slightly declining, indicating the market is not currently trending. Some ambiguity between these two indicators may be expected in the early stages of a trend.
On Balance Volume has come down to find support at the long held blue line. Because this line is not steep, is long held and repeatedly tested it has good technical significance. This trend line on OBV may serve to hold up price here.
RSI is not extreme, so there is room for price to rise.
Stochastics is not extreme, so there is room for price to rise. But this oscillator may remain extreme for reasonable periods of time in a trending market. Its best use in a trending market is for divergence to indicate trend weakness.
While the trend remains intact, downwards corrections may be expected to find support about the 13 day moving average. Price today is almost at this average. If price moves any lower, it may not be by much.
This analysis is published @ 07:55 p.m. EST.