FxWirePro: Gold’s Tug of War Between Hammer and Shooting Stars – Trade Tunnel Spreads and Long Hedge

Technical glance: Gold (XAUUSD price) has continued to sense selling sentiments after shooting star formation at $1,321.23 levels, hammer patterns have occurred at $1,280.95 and $1,282.54 levels (on daily plotting). Consequently, bulls had taken-off rallies above DMAs.

But for now, bullish sentiments seem to be exhausted at $1,326.15 levels. 

More weakness likely as both momentum signal overbought pressures and trend oscillators have been indecisive on this timeframe. 

The formation of “hammer and 3-white soldier pattern candlesticks” has stimulated a bullish environment in the major trend. Bulls resume consolidation phase after the formation of hammer patterns at the double top neckline (refer monthly plotting). As a result, the current price on this timeframe has spiked above EMAs with the bullish crossover. Both RSI and stochastic curves, also converge upwards to the upswings.

Trading tips: At spot reference: $1,313 level, on trading grounds, as stochastic curves are in overbought territory, to participate in the current uptrend one can trade this commodity with boundary options with upper strikes at 1,319.25 and lower strikes at 1,304.29 levels. The strategy is likely to fetch leveraged yields as long as the underlying price remains between above strikes on the expiration.

Alternatively, on hedging grounds, we advocated long positions in CME gold contracts for Jan’19 delivery, when the underlying was trading at $1,250/oz. We now like to uphold the same strategy by rolling over the contracts to February delivery as we could foresee more upside risks.

Currency Strength Index: FxWirePro's hourly EUR is at -69 (bearish), hourly USD spot index is inching towards 114 levels (bullish), while articulating at 14:32 GMT. 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex