Sitting in a downtrend and having been comprehensively rejected at resistance during the New York session, gold’s corrective bounce may have already run its course.
Two consecutive failed probes above $4367 resistance suggest offers are parked above the level, with the latter rejection delivering a key reversal candle on the H4 timeframe, warning of downside risk. The price action since has been heavy to say the least, leaving gold sitting just above $4300.
That’s now the focal point on the downside for those contemplating short setups.
For those looking to enter immediately based on the bearish price action, shorts could be initiated with a stop above $4320 for protection, given the last two H4 candles failed to hold above that level. Potential targets include $4270 initially, with $4246 and $4170 other options depending on the desired risk-reward profile. $4301 is a level of note in between, coinciding with where the price bounced from early in Monday’s European session. If price cannot break beneath it easily, consider nixing the position.
Should we instead see price break and hold beneath $4300, another option would be to initiate shorts with a tight stop above for protection, targeting the aforementioned downside levels.
Like the price action, the message from the oscillators is becoming increasingly unconvincing for bulls. RSI (14) has rolled over, snapping the bullish trend in place since late last week, although it remains above 50 for the moment. MACD is also looking toppy, starting to curl back towards the signal line while remaining in positive territory. The overall message still marginally favours a bullish bias, but it’s an increasingly cautious one.
Of course, if the price were to hold above $4301, the option would also be there to initiate longs with a stop beneath the level for protection, targeting a retest $4367 resistance. However, it’s the least favoured of the setups being considered.
Good luck!
DS