FxWirePro: Interim Bears Hamper Gold’s 6-1/2 Year Highs, But Hammer Counters Double Top Pattern in Major Trend

A cause of concern for Gold’s (XAUUSD) rallies in the short run, was reported in our recent write-ups. Bearish patterns, such as, shooting star and hanging man are traced out at the stiff resistance levels of $1,528 that hamper the prospective 6-1/2 years highs. Consequently, the current price slid below DMAs.

Shooting star and hanging man have occurred at the peaks of the rallies at $1,519.99 and $1,521.73 levels respectively on daily plotting (refer 4H chart). As a result, the gold prices dipped up to the lows of $1,480 levels. For now, the minor trend tests supports at $1,492 levels but there is no substantiation from technical indicators. 

The breach below this supports at $1,492 levels likely to expose the gold prices up to the next strong demand zone of $1,450 levels in the near terms. 

On monthly terms, bulls break-out the stiff resistance and hamper the potential triple top formation (refer monthly chart). As a result, the current prices spike off well above EMAs with bullish crossovers, thus, the uptrend has hit 6-years highs as per our previous prediction.

In addition, hammer occurs at $1,200 levels to counter double top formation on this timeframe, 

Hence, uptrend likely to prolong on bullish EMA & MACD crossovers, and both leading oscillators substantiate these buying sentiments.

Well, contemplating all the above technical rationale, on trading grounds, at spot reference: $1,498 levels, one can think of trading tunnel options spread with upper strikes of $1,505 and lower strikes at $1,492 levels.

Alternatively, on hedging grounds, we advocated long positions in August month’s CME gold contracts. We now like to uphold the same strategy by rolling over the contracts for September’19 delivery as we could foresee more upside risks.