Gold/EUR Is A Buy
Chart courtesy of Tradingview.com
In my January post, I gave the recommendation to buy Gold versus the EUR at 1022 EUR, with a target for inverse Head and Shoulders pattern at 1208 EUR. As seen in the above monthly Gold/EUR chart, the target hasn't been reached so far, but the maximum advance of 138 EUR (14% between 1160 and 1022 EUR) was significant. Today I will update you on that idea with a new pattern that I found on the chart.
For 10 years, the Gold/EUR has been in a long-running uptrend (highlighted in green). The price had been elevating all the way up from 2005 charting clear zigzags and peaked only in 2012 at 1384 EUR level. Then we saw almost a 40% sharp fall from 1384 down to 856 EUR minimum. At the end of 2013, Gold touched the downside of the trend and one month later, at the start of 2014, the market rebounded from the support and found resistance at the magic 1000 EUR level where the price bounced off into a sideways consolidation between 900 and 1000 EUR.
When I wrote my January post, the Gold/EUR already broke up above the mentioned 100 EUR range, and then the price rocketed up reaching the 1160 EUR level within a month. The previous target at 1208 EUR hasn't been hit, and the market became rangy for the next 3 months.
In my opinion, we will see a breakup and further advance of Gold/EUR soon. My favorite Bull Flag pattern appears on the chart (highlighted in black). It's a continuation pattern, and we have an amazing coincidence of the Flag's target and recent high. The Flag’s pole distance added to the break point hits 1384 EUR level where the 2012 maximum stands.
The trade setup is to buy Gold against the EUR at the current 1097 level (or keep your January long if you bought that time) with 1st target at 1384 EUR and the 2nd target located on the upside of the trend at 1520 EUR. The stop loss should be set below the current month candle (below 1040 EUR level). The risk/reward ratio (for the first target) is 1:5, very nice!
Chart courtesy of Tradingview.com
In January, I also posted another long-term trade setup to short Copper. Here's a quick reminder of the main trade figures: entry point was at $2.7545, stop loss at $3.03 (still alive) and the target was at $1.3905 (not reached yet). For those who want to stay short, I will update the target level below.
After Copper had breached below the $3 horizontal support in November 2014, the follow-through selling pressure appeared and the price quickly dropped down to the $2.42 low. A rebound from that bottom was almost as fast, and it took 4 months for the price to reach back the $2.96 level. I think Copper won't get to the $3 level as sellers were impatient and sold even below the resistance. It's very healthy for the trade that the price returned to the breaking point and then fell back confirming the setup.
The $3 level acts as a tough area of double resistance where both the horizontal support and falling trendline have crossed. On the downside, there are two important levels to watch, the first is the low area at $2.385 from 2007 and 2015. If the price moves below it, you can move the stop loss down to breakeven area and enjoy safe trade. The second support is located at the 10 year low level at $1.25.
The trade setup is to sell Copper at the current $2.83 level (or keep short for those who sold earlier) with a stop above $3.03 and the target at $1.25 (as no more major supports are seen). The risk/reward ratio is huge, 1:8, enjoy the trade!
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stock(s) mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.