Gold is Bottoming for a Retrace to VWAP of its Silver and Red Megaphones
Gold’s trying to bottom for a retrace to 1325. If you see a little triangle right shoulder form on the inverse H&S bottom on the chart, gold is going to take off upwards quickly (green scenario).
But odds are at least 2 to 1 that gold is going to put in a lower low as part of a megaphone bottom (purple scenario).
Gold broke out downwards through its 200 dma on the December contract on Thursday and failed to retake it Friday. Now it’s been picking at the 200 dma once again.
Gold Needs to Retest its Orange Megaphone Top & Red Neckline from Inside
On the daily chart, gold needs to retest its orange megaphone top and red inverse H&S neckline from inside. A quick clean move up from here (green scenario) would set up a short to at least the orange megaphone VWAP.
If gold instead gets bogged down in the purple scenario, we could see a complicated set of moves to work it back up to those retests while also working it down to the orange megaphone VWAP, and then it could keep moving sideways for a long time.
The basic premise longer term is that a quick crash down to the blue megaphone bottom at roughly 1000 to take out the existing low would likely mean the final low before a big move up.
A dragged out move between the blue and orange megaphone VWAPs, in which the retest of the January low gets bought hard, would likely lead to a prolonged, confusing sideways move as gold sets up a triangle (silver) before a move down into the 700s.