Choppy Gold-Fibonacci Support In View

Posted Tuesday, February 6, 2018 by
Shain Vernier • 2 min read

One of the biggest financial stories of 2018 has been the recent volatility in global equities. The last 24 hours have put an exclamation point on this idea, with massive drops occurring in the FTSE, Nikkei, S&P 500 and DJIA. Uncertainty is the order of the day, with erratic action spilling over into the gold products.

A typical beneficiary of fear in the financial markets is gold. Safe-havens perform well amid chaos, which the last 36 hours have provided in bulk. However, an explosive rally in bullion has not developed. Aside from a short-lived bullish breakout after today’s electronic open, bears have entered the market in force.

Gold Technicals

April gold futures are mimicking the DJIA and S&P 500, trading in a whipsaw fashion. Buyers and sellers are currently slugging it out near a crucial technical area on the daily timeframe.

April Gold Futures (GC), Daily Chart

The initial break out above Monday’s high has reversed. The washout beneath 1330.0 I outlined in a live market update from yesterday managed a rapid 16 tick downside move. Since those extremes have been violated, we have observed a regression to fair value.

Here are the key levels to watch for the remainder of the U.S. session:

  • Support(1): Macro 38% retracement, 1321.7
  • Resistance(1): Bollinger MP, 1334.3
  • Resistance(2): 20 Day EMA, 1337.0
  • Resistance(3): Daily SMA, 1338.0

Bottom Line: For the session, gold has violated both extremes of Monday. The failed auctions at these areas have been followed by rotation back toward the Bollinger MP and Daily SMA. As of this writing, price action is testing these areas.

It seems as if this market is poised to head lower. For the near future, I will have standing buy orders at 1322.0 in April gold futures. With an initial stop at 1317.9, this trade produces over a 40 tick return using a 1:1 R/R management plan.

Markets are active, so be sure to have your stops down and leverage in check.

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