4-month down trend in gold price XAUUSD over; potential bottom setup
Yesterday’s XAUUSD price action has given me a clear indication to aim for 1330 and subsequently 1392.
In this post, we look at 2 charts and the elements that make me feel that we are looking at a potential bottom here. This changes my fence-sitting earlier this month.
Chart #1 – Bullish expansion in daily time frame
- XAUUSD fell for 4 months from August to November; key features of this down trend are lower month-month lows and highs.
- Price did a bullish expansion (green zone) i.e. price expanded upwards, built a higher-high; this is the setup for the beginning of a bullish trend.
- There is evidence that price is working on a higher support than 1180.
- There was a false break at the beginning of the month (red circle) that gave bears false hope BUT
- We can say that yesterday’s big rally has removed any doubt in my mind that price action is printing an up trend.
Chart #2 – Bear trap and setup for bottom of channel
Now these are the features I see on the big picture weekly time frame. In my mind, there is a good chance for further rally since:
- Price managed to stay above 1180 despite falling below the last 2 months.
- Price below 1180 (brown) could be labeled ‘selling climax’.
- Based on trend line studies, the first big overhead resistance is an apex at 1330.
- The second overhead resistance is 2014 high at 1392.
- It is possible that price could still test 1180 but not likely.
- Price has broken out of a July-December trend line.
Does this change trend of gold price decisively?
No. As a matter of fact, my first chart describes a potential up trend in the daily time frame i.e. month-month price action. However even if price goes to 1392, on a year-year basis, trend is still down although it could be a slight improvement by turning into a sideway consolidation.