Open Price as a gauge of market sentiment
Previously I wrote of opening price as a technical support resistance. It is also great as a gauge of market sentiment. Concepts of market sentiment based on Open Price come from candlesticks.
There are two reasons that makes Open Price very significant:
- It cannot be re-printed like some indicators do so it works very well with rule-based trading strategies.
- Open Price can be defined as the starting price of the year, month, week or day or any lower. It becomes a very powerful anchor for traders who need to deal with multiple time frame analysis and can suit anyone’s trading plan.
Gold price now bullish
We can see from this daily chart of XAUUSD that mostly falling Gold price can be interpreted in two ways:
- Down trend is dominated by lower week-to-week highs. (Lower lows are taken for granted in a down trend but highs reveal more about the ability of bulls to push price up).
- Month-to-month price is mostly bearish since they close below the Open.
A completely bullish reversal type of technical picture that can convince investors and traders to enter the long side must therefore look like this:
- To reverse the down trend of lower week-to-week highs price must make a Higher-Week-High followed by a Higher-Week-Low.
- Show us bullishness by trading above the Open.
Although we do not have the first condition, the second has presented itself. Price dipped below this month’s opening level at $1233.93 but formed a V-shape and is now bullish. As long as price can build a base above $1233.93, there is a chance for it to go higher. It is not a buy signal, there is no bullish reversal pattern but bullish investors and traders have hope.
Silver is weaker, not bullish because conditions not met
The picture of Silver during the same period of time is very clearly down trending. Apart from Week 7 in the chart below, Silver had 23 weeks of falling highs since price started expanding downwards late January. Until this trend is reversed no one can truly be convinced that price of Silver has reached bottom. We also know one other additional fact: that market sentiment for Silver is weaker than Gold because it was not able to overcome its own Open Price of $19.536 established at the beginning of July.
- Open Price is a good indication of market sentiment
- There are no signals to buy gold and silver
- But Gold is more bullish now than the beginning of the month
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.