December gold futures spiked beneath Wednesday’s session low, early on in the electronic trading session. The selling did not last as the price rotated back into the established value area.
With consolidation setting up on the daily timeframe, where do we go from here?
Big Action Under Yesterday’s Low
Wednesday’s session traded inside of Tuesday’s range, setting the stage for a breakout in December gold futures. A nice spike in participation under Wednesday’s low at 1268.9 looked to create a possible trend day down.
December Gold Futures 1-Minute Spike In Volume
Trading under last session’s low brought a flurry of orders to the market. Getting in and out of these areas can be tough, but these types of trades can be very lucrative. Congrats to anyone who got in on the scalp and grabbed a few ticks.
There is certainly heat in the gold market right now, and that is a good sign.
Where Do We Go Now?
The gold market remains strong and is still in position to test the 1300.0 level at some point in the coming months.
December Gold Futures Daily Chart- Reversal Or Consolidation?
A few clues are obvious through a quick examination of the intermediate-term technicals:
Today’s failed sell-off did not test 38% of July’s range. I take this to be a sign of strength, as is the immediate reversal posted this session.
The swing high of 1280.3 on the daily time frame will be an area of topside resistance.
Gold has tested the 62% retracement of Wednesday’s range and is currently trading near the 50% level.
Bottom Line: Gold is entering a consolidation pattern on the daily chart, trading 1275.0 over the last four sessions. However, tomorrow’s release of U.S. Unemployment may drive this market directionally.
Short entry points at 62% (1275.1) and 78% (1276.8) of Wednesday’s range are solid sells for later today. A stop above Wednesday’s high of 1279.0 is a concrete out and is easily tightened at session’s end.
Holding this trade is risky going into Friday’s data releases. However, a return to Wednesday’s low is certainly a possibility and yields a 1.5:1 payout.