Hi Traders! Gold short term forecast update and follow up is here. On January 27th I shared this “Gold Short Term Forecast And Technical Analysis” post in our blog. In this post, let’s do a recap of this setup and see how it has developed now. If you would like to learn more about the way we trade and the technical analysis we use then check out the Traders Academy Club. Spoiler alert – free memberships are available!
My Idea
On the H4 chart, the price which was moving higher has reached a key resistance zone formed by the 100% (1859.36) Fibonacci expansion level of the first wave, respected it and has bounced lower from this zone. Also, we could see that the price which was moving higher has created a bearish divergence between the first high that has formed at 1847.85 and the second high that has formed at 1853.81 based on the MACD indicator. The price then moved lower and broke below the last low at 1828.48 creating lower lows, thus forming a classical setup of bearish divergence followed by bearish convergence, we may consider these as evidences of bearish pressure. Generally, after a bearish convergence we may look for corrections and then further continuation lower. In addition to this, the ADX indicator gave a bearish signal here at the cross of -DI (red line) versus +DI (green line) and the main signal line (silver line) reads value over 25 which we may consider as yet another evidence of bearish pressure. So based on all this, until the key resistance zone shown in the image below (marked in red) holds I expect the price to move lower further after pullbacks.
In Gold, on the H4 chart, based on the above-mentioned analysis my short term view was bearish and I was expecting the price to move lower further until the key resistance zone holds. After the bearish convergence the pullback that I was looking for didn’t happen on the H4 chart and the price moved lower directly without pullbacks, providing a nice move to the downside so far.
On the H1 chart, we had a small pullback with the price creating a bearish hidden divergence between the first high that has formed at 1816.80 and the second high that has formed at 1799.28 based on the MACD indicator which we may consider as a fact provided by the market supporting the bearish view. Also, there were no signs opposing this short term bearish view. Then as you can see in the image below how the price moved lower further and provided a nice move to the downside until it was blocked by a bullish divergence.
So, traders, this is why I wanted to show this example to help you understand how important it is to follow the facts. The facts were supporting the bearish view here and there were no signs against it. When the facts do happen as we expected you can see how the price perfectly moved as per the plan. Because these are the kind of hints the market provides us at majority of the times and it’s our obligation as traders to be able to listen to these things that the market tells us and we should try to make the right actions.
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Happy Trading!
Arvinth Akash
Traders Academy Club Team.
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