swing trading

Gold Analysis (March 31, 2017)

| Swing Alpha on 7 Mar 2017 12:00 AM

Gold Still Holding at Resistance Despite GDP Beat

The final number for U.S. fourth quarter GDP came out on Thursday. It was expected to be 2.0% but came out at 2.1% instead.

If you like to trade gold, you were probably hoping that it would fall dramatically on this news so that you could buy it cheap. But alas, day-traders were not that stupid. At least, not this time.

So here's the latest chart.


On Monday, the priced poked above the $1250.40 line that separates the second and third ranges from each other (see my first article from this series for an explanation of these ranges). It then tested the 200 SMA at $1262.20. But of course it failed to break through when no one knew what GDP data was going to show.

When GDP came out above expectations though, there was really no hope that it was going to break above resistance. Instead, it was more likely to fall.

And it did fall. Just not very much.

The price has now gone back to the 10-day EMA. It's possible that it could go up from here until it hits the 200 SMA at $1259.04. But if it does this, it will almost certainly fall again.

The two exceptions to this would be if the FED minutes released on Wednesday contain some very dovish statements or if unemployment claims on Thursday are much higher than anticipated. In that case, the price may finally break above the 200 SMA.

However, the most likely scenario continues to be a short-term fall in the price of gold. This is because the entire rally has been supported by incredibly low volumes – as can be seen in the “volumes” indicator at the bottom of the chart.

How to trade gold this week.

In the absence of any major news justifying it, a move up to the 200 SMA at around $1259.04 is an opportunity to short. In this case, a stop can be placed above the 200 SMA as far up as $1271.06, with a take-profit at the upward sloping trend-line from January at around $1213.17. This produces a reward/risk of greater than 3:1.

Alternatively, if the price falls down to the upward sloping trend line at $1213.17, it's time to look for a strong candlestick reversal pattern. If a hammer, bullish engulfing, or railroad tracks pattern appears, this is an opportunity to go long with a stop-loss at the bottom of the range ($1200) and a take-profit at the 200 SMA ($1259.04) for a more than 3:1 reward/risk ratio.

If the price falls to around $1213 and no bullish candlestick pattern emerges, this could mean that the entire pattern over this past month is be a bearish “double top” reversal pattern and that gold is going to fall much further before it starts going up again.


We won't know if this is the case unless the price falls below $1192.90. But it's something to watch out for. So it's a good idea to wait for a candlestick pattern or other confirming indicator before entering a long trade.


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3 Mar 2017 4:38 PM | Anonymous

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