Whipsaw Action In December Gold Futures

Posted Thursday, August 30, 2018 by
Shain Vernier • 1 min read

The U.S. indices have opened moderately in the red following Wednesday’s surprise upward revision of GDP (4.2%). With fresh all-time highs on the horizon for both the DJIA and S&P 500, investors are evaluating the prospects of taking on even more risk for the second half of 2018. The result has been a tight three-session run for December gold futures. Consolidation typically leads to a breakout — when is gold going to move?

In a trade recommendation from Wednesday, I outlined a scalping plan to the short in December gold futures. The trade went unelected, but today’s early action is showing some of the expected price action. At press time, gold is grinding south and threatening to break toward the psyche area of 1200.0.

December Gold Futures

Since the sell-off of Monday, December gold has traded in a tight range between support and resistance levels on the daily chart. The Bollinger MP and Daily SMA have held firm. In the event that one gives way, a directional move is likely.

December Gold Futures (GC), Daily Chart
December Gold Futures (GC), Daily Chart

Here are the levels to watch for the remainder of the session:

  • Resistance(1): Bollinger MP, 1213.1
  • Support(1): Daily SMA, 1207.9
  • Support(2): 38% Current Wave Retracement, 1200.2 (not pictured)
  • Support(3): Psyche Level, 1200.0

Bottom Line: As of this writing, December gold has broken beneath the Daily SMA and is trading at the 1202.0 handle. If the bearish action continues, a long from the 38% current wave retracement will come into play.

For the remainder of the session, I will have longs queued up from 1200.6. Using an initial stop loss at 1198.9, this trade produces 17 ticks on a 1:1 risk vs reward ratio.

The proximity of the 38% retracement to 1200.0 is an advantage. Buyers are likely to defend the big round number and give us a bullish bump to the upside.

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