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Chart Of The Day: Gold Completes A Bullish Pattern, Could Yet Head Past $1,900

By Investing.com (Pinchas Cohen/Investing.com)CommoditiesApr 07, 2020 10:09AM ET
www.investing.com/analysis/chart-of-the-day-gold-completes-a-bullish-pattern-could-yet-head-past-1900-200520861
Chart Of The Day: Gold Completes A Bullish Pattern, Could Yet Head Past $1,900
By Investing.com (Pinchas Cohen/Investing.com)   |  Apr 07, 2020 10:09AM ET
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Earlier today, gold futures hit a seven-year peak of $1734.35. They've retreated for now, but we believe the contract's bullish run is by no means over. It may yet take on the August 2011 all-time high of $1913.50.

Indeed, even after slipping from its session highs, the yellow metal is still up for the fourth day in a row. And this comes after yesterday saw the best U.S. equity rally since late March, with indices reaching near-4-week highs.

This also occurs despite China’s report today of its first day since January with zero coronavirus-related deaths and an apparent flattening of the fatalities curve across global COVID-19 hot spots. Yet demand for the original safe haven asset remains strong.

Technical analysis supports this theory, with clear indications the precious metal is likely to go a lot higher, possibly even challenging its record.

Gold Futures Daily Chart
Gold Futures Daily Chart

The contract has completed a H&S continuation pattern. It looks like a bottom H&S, but it follows an uptrend. It also contains the same dynamics: a temporary struggle between supply and demand, with demand absorbing all available supply, then increasing bids to meet new, willing sellers.

Investors must consider fake breakouts, or in this case, a bull trap. Traders employ a device called a filter, in which they wait for a price penetration and/or time to go by, which proves the move is stable, before they risk a position. So far, we have a 2.39% penetration and if the price closes above the $1,700 neckline we’d have a 1-day filter.

Trading Strategies

Conservative traders would wait for a minimum 3% price penetration and a 3-day time filter. That means if the price approaches $1,750 and remains above the $1,700 neckline, they might be willing to go in. They are also likely to wait for a return move that demonstrates accumulation above the uptrend line.

Moderate traders may already be satisfied by the price penetration but may wait for a Thursday close to satisfy the time filter. They, too may wait for a return move, but for a better entry, not necessarily for proof of trend.

Aggressive traders may jump in for an early take after the price closes today above $1,700.

Trade Sample

  • Entry: $1,700
  • Stop-Loss: $1,690
  • Risk: $10
  • Target: $1,730
  • Reward: $30
  • Risk:Reward Ratio: 1:3                                                                                                                                                                
Chart Of The Day: Gold Completes A Bullish Pattern, Could Yet Head Past $1,900
 

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Chart Of The Day: Gold Completes A Bullish Pattern, Could Yet Head Past $1,900

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Comments (5)
Nick Gee
Nick Gee Apr 07, 2020 3:24PM ET
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Thank you!
Jonathan McBrine
Jonathan McBrine Apr 07, 2020 12:00PM ET
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The damage is done, we can erase the job losses and some of them will be from businesses that won't survive.  We can't undo the numbers that will be reported with even big companies losses in profit.  We can recover as a nation, but not everyone will survive economically.  Gold will go to over 1900 and maybe higher.
Manbear Pig
Manbear Pig Apr 07, 2020 11:55AM ET
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I tend to agree with this article.
Alex Malmstrom
BrassTacks1 Apr 07, 2020 11:48AM ET
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Volume and open interest are not supporting this bullish move, yet. Also, last week commercials dipped well below 300'000 so this rally to me looks a little suspicious, probably will see profit taking before the Easter weekend.
Nick Gee
Nick Gee Apr 07, 2020 11:48AM ET
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Appreciate the comment and opinion
Bean Flicker
Bean Flicker Apr 07, 2020 11:14AM ET
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About as amateur of an entry and stop loss as you could get.
Pinchas Cohen
Pinchas Cohen Apr 07, 2020 11:14AM ET
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Thank you for your constructive criticism.
Jonathan McBrine
Jonathan McBrine Apr 07, 2020 11:14AM ET
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This is something you can't evaluate fully on a chart.
 
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