Knee-Jerk demand for Haven Assets – Gap In Gold
Good morning FX traders, I hope you are coming back refreshed from a great weekend. Monday has started with some serious fluctuations, thou
Good morning FX traders, I hope you are coming back refreshed from a great weekend. Monday has started with some serious fluctuations, though most of it wasn't tradeable as the market opened with a huge gap. Here's how we can trade the gap in gold.
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What's the GAP?
Newbies, the gap refers to the area where the price of a currency, stocks, indexes or a commodity moves sharply bullish or bearish, leaving no sign of trading in between candlesticks or the bars on the chart of that security. It is normally caused by a sudden change in fundamentals in the market.
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Why did gold open with a gap?
In my previous updates on gold, I mentioned the uncertainties caused by North Korea and the United States. Over the weekend, the risk-off sentiment strengthened when North Korea’s latest nuclear test prompted a knee-jerk shift to safe haven assets, causing some serious drops in the equity markets. Read more about North Korea.Â
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How to Trade Gaps?
Historically, gaps are meant to be filled the same day, if not, then in the upcoming days. So, we can expect gold to drop gradually to $1325 until it covers the gap.
Gold – 4-Hour Chart – Bullish ChannelÂ
Gold Trade Plan
Looking at the 4-hour chart, the yellow metal is holding right below the upper corner of a bullish channel, testing the ascending trend line resistance at $1337. It's leaving us with two options:
Sell – Below $1337 with a stop loss above $1340 to target $1325.
Buy – Above $1324 with a stop below $1320 and a take profit at $1332.
Good luck fellows, looking forward to another profitable month.
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