FxWirePro: Gold reduces glitter after breaking wave baseline, bears to prolong 7-week lows as leading oscillators signal bearish momentum

Technical glance:

The technical charts of gold form wave patterns on daily terms as you can see there are upswings and troughs in the recent past.

The price behaviour is oscillating within the limits of these waves. But yellow metal has not been able to hold onto trend line support and sliding below consistently from 24th May.

As a result, it breaks below major supports at channel base and at 1225.60. But for today bulls hanging at the same juncture.

It has also slid way below DMAs, with 7DMA crossing below 21DMA which is a sell signal.

While, leading oscillators signal intensified selling momentum on daily as well as weekly terms.

RSI, Stochastic curves have been indicative of suggesting current bearish trend to prevail as they have been converging to the declining trend.

While MACD's bearish crossover approaches bearish trajectory that is likely to drag down further.

On broader perspective, current prices have slid below 7EMA to signal further weakness in the days to come.

Bears in Gold has wiped off  buying interest completely and been tumbling consecutively from last couple of weeks, now at testing supports at wave baseline with 7-weeks lows.

Trading tips:

Since we reckon more bearish sentiments in bullion markets in near terms, it is advisable to speculate yellow metal with option tunnel construction for the targets of 20-25 pips.

As per above technical reasoning, stochastic and RSI pop up with selling momentum so far, so shrewd way to tackle this precious commodity is to deploy the option tunnel using ATM puts is structured as a binary version of a conventional put spread, i.e. long delta puts with higher strikes while writing the lower strikes for above mentioned targets on either side.

Therefore an In-The-Money tunnel would be formed of an In-the-money -0.71 delta put below the spot rates less an Out-Of-The-Money put above spot rates. The delta of -0.51 on combined position with theta is preferred to be near zero.

Alternatively, stay short in futures of near month expiries for targets of 1215, but no wonder even if it hits 1200 zone sooner or later.