A Possible Breakout Trade Setup In Gold

Posted Monday, February 5, 2018 by
Shain Vernier • 1 min read

The last three months have been a wild ride for gold. In the midst of a sustained bull market in equities, bullion has continued to post consistent gains. Even though Friday was not a good session for bulls, long-term positive sentiment remains intact. This morning’s action has shown buyers to be present at several key support levels.

Be sure to check out my colleague Arslan’s analysis facing the XAU/USD instrument. If you are not able or interested in engaging gold on the CME futures market, the XAU/USD product offers many opportunities.

Gold Technicals

April gold futures are currently consolidating inside of Friday’s massive range. It appears as if indecision is the order of the day as traders duke it out near the Daily SMA.

April Gold Futures (GC), Daily Chart

From a purely technical perspective, a bullish bias towards gold remains valid. Price is firmly above the 38% Fibonacci retracement of the current uptrend. In addition, bearish action was not sustained beneath support.

Here are the key support levels for the remainder of the session:

  • Support(1): 20 Day EMA, 1337.0  
  • Support(2): Daily SMA, 1335.4
  • Support(3): Bollinger MP, 1333.7

Bottom Line: A breakout scalp from beneath Friday’s low is a great way to play a washout of today’s early market. Sells from 1330.0 should attract heavy participation, driving price south 8-15 ticks relatively quickly. Using a 1:1 R/R management plan, this trade is an affordable way to grab a few ticks in a hot technical area.

As of this writing, gold is rotating in a tight range well above the 1330.0 level. Even though the trade going live today is unlikely, the setup is too good not to mention.

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