February scored the first point in favor of the bulls breaking the downtrend. Usually, when we get something that we want, after moments of winning euphoria, we start to feel sad about further uncertainty – what is next? To avoid that feeling we should work out a new plan like the one that I prepared for you below.
Chart 1. Gold Monthly: Gold Bugs, How Deep Is Your Love?
Chart courtesy of tradingview.com
Speaking globally, the sad thing for the bulls is that we can’t be sure of the Big Bull Run until the price is below the previous high at $1920. I can add more points saying that there is still a chance of a complex correction, which can last longer, much longer. Gold was in an uptrend for 12 years and the current correction took only 4.5 years. Therefore, the probability of its prolongation is high as the correction might last longer the than major trends. It is human nature when we have a clear idea to act decisively and swiftly (trends), but once we fall into a thoughtful mood reflecting of further plans we are losing/taking our time to think everything thoroughly (corrections).
I put the magic Fibonacci retracement levels on the chart to show you the areas of a potential reversal. The 38.2% level was omitted intentionally as I think we should reach at least halfway at $1483 and even the most common 61.8% level at $1586. I will calibrate the levels when we have the first medium term correction to build the AB/CD segments within the red BC segment. In the meantime, we've witnessed the first step to the upside with many more to come, prepare your pockets!
In my very first post this year I used trend angles to show you the strength or weakness of the market, this time, I used it to build possible price developments in the gold market. Physics says, “ the angle of incidence equals the angle of reflection,” therefore I measured the angle of the first drop and put it first to the upside and then to the downside charting a red zigzag. This is an ideal plan with many ifs and whens, which illustrates the global map of price movement. It also shows that the end of the implied correction falls in the year 2025 an “ideal” outcome with a total 14 years of correction. I guess that we should consider +/-3 years of difference.
Chart 2. Gold Weekly: First Upmove Is Underway, Good To Buy On Correction
Chart courtesy of tradingview.com
As seen on the weekly chart above the price is still above the broken downtrend as bulls keep kicking it higher. The price has often met a Double Bottom pattern only to reverse to the upside and when the gold broke above the neckline at $1192 the rise accelerated enough to move through the blue trendline beyond $1240. The bottom left's high at $1307 is the target for the pattern.
I drew Fibonacci retracement levels with a zero point at the projected target to show you the area of a potential bounce back. The correction is imminent, but we should wait for the top to be shaped to calculate the actual retracement levels and redraw it on the chart. These levels would work only if the market peaks at the pointed level, which is of course yet to be proved.
So the main idea is to wait for the deep correction and be prepared to enter a long position on a market dip.
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks 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.