Medium term
Trade view / 23 December 2014 at 6:51 GMT

Gold's last leg lower might have started

Instrument: GOLDFEB15
Price target:
Market price:
Background

Gold (XAUUSD, GOLDFEB15) has been in a bearish trend since 2011, a trend that appears set to continue. I am working under the assumption that the overall decline is corrective in nature, with a three wave decline into the June 2013 low, with that low followed by what I interpret as an X-wave triangle which should be followed by at least another three waves lower.

So far we've had one leg lower followed by a three wave bounce. Ideally I would have liked to have seen the price move towards the 1250 level, which was the fourth wave of lesser degree of the prior move but the market might have turned before. This could, of course, happen if the main trend is strong.

The last couple of trading sessions the market have started to move lower again, the Slow stochastic indicator (STOC-S) turned lower from oversold levels and the 200 day and 50 day Moving averages are in the state of bearish alignment. 

Management and risk description

If gold has embarked on a new bearish leg, there shouldn't really be any mercy to the bulls. The idea is to sell at market around 1180 USD/oz, with a stop at 1220 USD/oz and targets of 1105 US/oz and 1024 USD/oz. Once the 1130 USD/oz level is reached, the prior bear market lows, move stop to entry.

The risk to this setup is that the correction higher is set to extend, such a scenario is found at the end of the chart list below. If this setup back-fire, I am planning to make another attempt from higher levels according to my alternative scenario.

Parameters

Entry: At market around 1180 USD/oz

Stop: 1220 USD/oz

Target: 1105 USD/oz and 1024 USD/oz

Time horizon: Up to three months

XAUUSD daily chart
XAUUSD daily chart


XAUUSD weekly development chart
XAUUSD weekly development chart


XAUUSD daily risk-/alternative scenario chart
XAUUSD daily risk-/alternative scenario chart
All Charts: Saxo Bank


— Edited by Adam Courtenay

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Non-independent investment research
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5y
net net
is very string gold member becouse this go up lvl major, imha.
5y
LION KING LION KING
you need to reduce your appetite cute - such a strong fall will not be . very strong technical level 1147
5y
dina dina
Hello Johann, do you see some waves structure or setup in Silver (XAG/USD ) ? Thank you for your ideas ; Dina
5y
Johan Berntorp Johan Berntorp
I'd be a lot cuter if I get my pray to bring home to the pride here :), at the first or second attempt. Appreciate your input LION KING, we'll see about that support going forward. If it doesn't break now I think it'll break later before a larger shift in the trend. My guess is that we'll see a major low during the first half of 2015.
5y
Johan Berntorp Johan Berntorp
Hi Dina! On what time frame? Larger picture?
5y
dina dina
Good evening Johan , yes I would like to know your ideas on Silver for the coming three months . The recent bottom at 14.10 was followed by a brief upward thrust but without follow through. Do you see some waves structure ? Is it now a 4th corrective wave completion to be followed by a final 5th wave down . On the short side of Silver I see the continuous USD index going to 93 and also a parallel with your gold setup , plus some clear signs of industrial slowdown . On the long side I see a bit of upside seasonnality ( for gold ) .
5y
Johan Berntorp Johan Berntorp
I can't say I am appreciating the price action so far. First a spike higher, than a retrace and another launch higher. Price action above 1207 would be suspicious...
5y
Shamnighty Shamnighty
Hi Johan

I hope you have enjoyed your few days off and are ready to kick some @ss in 2015! I have decided to enter this trade and hopefully it will reach the targets you have in your thoughts!
Happy New Year and wish you a lot of awesome trades!
5y
Johan Berntorp Johan Berntorp
Yes, GL. I am in as well but could have gotten a better entry...
5y
Johan Berntorp Johan Berntorp
2015 has a lot to offer I think, will be exciting! Happy new year to you too!
5y
Johan Berntorp Johan Berntorp
@dina I don't believe the bounce is a 4, due to, among other things, technical indicators I believe it is an abc, which could be a w before another up-leg y (it appears to be a 50/50 situation). I use more or less the same wave count as on Gold but the major high was possibly truncated in Silver. This has followed Silver in it's relation to Gold since. Also, I don't think the structure off the Bull Market highs or the truncated Bull Market high is impulsive but corrective. The triangular structure that broke down earlier this year is, in my point of view at this juncture an X-wave. Which, if so should be followed by a large ABC lower. We appear to have concluded the A and are in or have recently completed the B. The final leg lower should be about the same length as the A, .382 or .618 of the length. I figure it could be a shorter one, but we are in for wild swing in 2015 as we could see a major low in Silver and Gold I think.
5y
dina dina
@Johan , please do correct me if I made the wrong targets calculation; X to A is 21,45 to 14,15 = 7,30 : .382% gives 1st target at 14,57 ( 17,35 - 2,78 ) _ .618% gives 2nd target at 12,84 (17,35 - 3,65 ). Happy new year , Dina
5y
Johan Berntorp Johan Berntorp
Yes, seems right.
5y
Johan Berntorp Johan Berntorp
Happy 2015 to you too!
5y
dina dina
Well Johan, wishing you a very successful 15 !
5y
Johan Berntorp Johan Berntorp
Yes, you too Dina!
5y
Johan Berntorp Johan Berntorp
I see no reason to have a stop higher than 1210 on the above idea. I have lowered my stop to 1210.
5y
Johan Berntorp Johan Berntorp
This is not working, I am folding. Taking my losses, square.
5y
Johan Berntorp Johan Berntorp
On above Trade view, it appears the alternative scenario might be in play. Gold has been stubborn and held up despite a plunge in the EURUSD...

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