Gold 1 OZ (XAU=X) Breakout Over $1595.50 Could Trigger Acceleration into $1619.60
Gold closed higher on Friday as concerns of an economic slowdown arising from the coronavirus outbreak kept the precious metal underpinned. Helping to generate the support was another plunge in U.S. Treasury yields and a steep drop in the U.S. Dollar against a basket of major currencies. Both helped drive up foreign demand for dollar-denominated gold.
In the U.S., the benchmark 10-year Treasury yield posted its biggest monthly drop since August as the deadly coronavirus fanned recession fears. Stocks also fell sharply on Friday, wiping out the Dow Jones Industrial Average’s gain for January.
Over the weekend, China said the coronavirus death toll hit 304, as confirmed cases crossed 14,000.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Friday when buyers inched through the previous main top at $1594.70. The main trend will change to down on a trade through the nearest main bottom at $1567.90.
The main range is $1458.50 to $1619.60. Its retracement zone at $1539.10 to $1520.00 is the main support area.
The intermediate range is $1619.60 to $1542.80. Its retracement zone at $1581.20 to $1590.30 is potential resistance. The market closed inside this zone on Friday.
The short-term range is $1542.80 to $1595.50. Its 50% level at $1569.10 is support.
Daily Swing Chart Technical Forecast
Based on Friday’s price action and the close at $1587.90, the direction of the April Comex gold futures contract on Monday is likely to be determined by trader reaction to the intermediate Fibonacci level at $1590.30.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1,526.36.
The projected upper bound is: 1,617.63.
The projected lower bound is: 1,567.11.
The projected closing price is: 1,592.37.
A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 32 white candles and 17 black candles for a net of 15 white candles.
An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend. It then signifies that the momentum may be shifting from the bears to the bulls.
If the engulfing bullish pattern occurs during an uptrend (which appears to be the case with PREC.M.XAU=), it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 76.1425. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 69.13. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 3 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 130.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 16 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 0 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed up 15.895 at 1,589.815. Volume was -0% below average (neutral) and Bollinger Bands were 26% narrower than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,569.90 1,515.45 1,451.65
Volatility: 11 11 14
Volume: 0 0 0
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAU= is currently 9.5% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 34 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.