Chart Of The Day: Why Gold Is Once Again Headed Lower
Investing.com | Oct 05, 2018 00:01
Fed Chair Jerome Powell said that we no longer need the accommodative policy we've had due to a weak economy and that we're "a long way from neutral" interest rates, suggesting there is considerable room for rate hikes. Investors dumped defensive in favor of growth and foreign assets in favor of US assets, pushing it to a sixth-day climb totaling more than 2.00 percent. Today, however, the Dollar Index is paring gains, falling about 0.15 percent, as some traders take profit.
Overall, the dollar needs to prove it’s still in an uptrend, which will be achieved by scaling above the 97.00 level, peaked at August 15. Gold, meanwhile, has been moving sideways, with a downward bias, since late August.
Note that while the precious metals slide from Tuesday's 1,208.31 high did not fall below its shorter-term uptrend line since September 28, the RSI did, suggesting momentum is reversing back toward the range bottom. The MACD also provided a sell signal, with its shorter MA (blue) crossing below its faster MA (red), as recent price data is weakening compared to older information.
h2 Trading Strategies – Short Position Setup/h2Conservative traders should wait for a clear breakout and sit out the whipsaws that tend to follow them.
Moderate traders would wait for the shorter-term uptrend line since September 28 to be broken, followed by a return move to test that uptrend.
Aggressive traders may short now, relying on the channel top’s demonstration of resistance on Tuesday and the MACD and RSI, as well the dollar strength. However, of course, a close below the shorter-term uptrend line would reduce risk.
Sample, Moderate Trade:
- Entry: $1,208 – after the shorter-term uptrend line has been violated and the price retests it from below, as well as Tuesday’s peak resistance.
- Stop-loss: $1,2012, range-top resistance
- Risk: $4.00
- Target: 1,180, range-bottom support
- Reward: $28
- Risk-Reward Ratio: 1:7
Sample, Aggressive Trade:
- Entry: 1,200 - psychological, round number resistance
- Stop-loss: $1,202, the whole number above today’s $1.05 intraday high.
- Risk: $2.00
- Target: 1,180, Range-bottom support
- Reward: $20
- Risk-Reward Ratio: 1:10
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