In the gold market, our weekly analysis emphasized the necessity to initiate short positions on Monday to capture a continuation of the bearish trend. This was due to last Friday's sharp decline of approximately $170, followed by a weak closing pattern with minimal recovery into the weekend. Following such a significant bearish candle with feeble retracement, the early Asian session on Monday typically sees a follow-through decline.
Our weekly chart analysis identified the first resistance level at 4347, which was the high point following Friday's late rebound. As prices hovered around this level between 8-9 AM at the market open, we advised aggressive traders to enter short positions directly. In a clearly bearish structure, waiting for higher prices to short often leads to missed opportunities. After an early spike to 4453 met resistance and turned lower, we emphasized shorting with a stop above the 4453 morning high, and to follow through with shorts upon a break below 4300. The price subsequently fell to a low of 4268 before rebounding.
In a weak market, corrective moves are expected. We indicated a secondary shorting opportunity below 4325, which was again profitable with an exit below 4290. Subsequently, we noted that after establishing a low, gold had likely completed its initial weekly bearish follow-through and could enter a corrective phase. In other words, any shorting in the evening session would need to be based on a retest of the 4353 high. This view was confirmed as the price rose to a high of 4347 before falling back.
Trading is built upon timing. The closing pattern of the previous trading day often sets up opportunities during the 7-9 AM window of the next session, a point we have stressed repeatedly. Furthermore, we generally avoid repeatedly shorting the exact same price level; the first or second touch is preferable. Given that the price has now tested and rebounded from lows multiple times, initiating new short positions today is not immediately advisable. It is prudent to wait for a rebound, assess its strength, and then consider positions, for instance, near the 4353 high or the 4372 level.
From the current chart structure, gold tested the 4268 low twice after a significant drop during the Asian and European sessions yesterday, rebounding to a high of 4347 during the US session before retreating, as expected, below the 4353 resistance. The overnight and early Asian session low is around 4312. The price is currently trading around 4340. Key resistance levels to watch are 4353, followed by 4372. Immediate support lies at 4312, with critical support at 4268. Operationally, consider shorting gold if it faces resistance around the 4353 area. If the price does not reach that level, watch for a break below 4312 to initiate a short. A strong break above 4353 would shift the potential shorting zone to around 4372.
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