April 29th, 2015
by Cliff Wachtel, FX Globe
Gold traders got surprise as gold and silver both spiked Monday. Here's how to trade gold in the coming days. A quick guide for intraday and short term gold traders.
Gold and Silver are back in focus after a sharp, unexpected, rally midday GMT Monday.
- From an intraday low of ~ $1178 Gold spiked $26 or 2.2% to ~$1204.
- As usual, silver moved faster, up 4.9% from its intraday low.
There are no obvious fundamental drivers. The USD decline over the same period has been minor, nor has there been a sudden surge in anxiety about Greece, or anything else.
Thus the consensus has been that this that this was a "technical move," (read: "we don't really know"). More on that below for those interested.
Throughout the Asian session, both gold and silver have held their gains with only minor pullbacks heading into the close.
So how do we play gold in the coming days (we'll hit silver tomorrow - stay tuned)?
Typically, after a huge move, assets tend to "take a rest." They pull back a bit and then trade in a horizontal trading range as buyers and sellers take time to digest the move.
Both our momentum indicators and the horizontal range-bound price action in our daily, four-hour and one-hour charts suggest gold will remain in a flat trading range for the coming day at least.
Here's a simple trade idea for gold day traders, based on our examination of daily, 4-hour and 1-hour charts. We'll only show the 4 hour chart, the only one you really need to see.
For intraday gold traders, the 4 hour chart provides a good "big picture" of likely major support and resistance for the coming 24 hours, barring some big new market driver.
Per the below 4 hour gold chart:
- Likely strong support for today: The 1198.66 area (bottom green horizontal line)
- Likely strong resistance for today: the 1202.59 area (top red horizontal line)
Gold 4-Hour Chart April 27, 2015. You can ignore the various technical indicators not mentioned for purposes of the above analysis.
Gold continues to consolidate
1. There is a support at 1198.66 area and a resistance around 1202.59.
a. Traders may set a stop loss close enough below 1198.66.
b. Typically we try to limit losses to no more than 3% of the trading capital.
2.if gold encounters a resistance at 1202.59 area, and a likely support at 1198.57.
a. Traders may set a stop loss close enough above 1202.59 so that if gold goes higher it limits the loss.
b. Preferably to no more than 3% of the trading capital.
Note: the middle support (1199.85) and resistance (1201.18) lines are useful for those on very short time frames (1-5 minute charts). Breaks below them also help alert us to possible breakouts up or down.
Author's note: Questions? Contact us at fxglobe.com or call one of our trained trading professionals to assist you. We're here to help you. Your success is ours!