Long Gold setup - New bull trend
Mis à jour
Central banks will be gold buyers this year, no doubt on that. We have trade tensions out there, economic slowdown, and fear of a recession among other issues.
That said, gold developed a 5-wave bull trend starting Sep/28/2018, finishing Feb/20/2019. Since then, it's stuck inside a complex correction forming a descending wedge, as you can see on the chart below.
On May/13 price broke up the descending wedge in what was meant to be a wave-F in the complex correction structure. That fact poises the question: Is that a wave-F or a wave-1 of a brand new bull trend?
Well, as you can see on the chart, the complex correction brought price down to the range between the 38.2% and 50% Fib-Ret of the prior bull trend, a common level where corrections usually finish. Despite that fact, price is nearing the 61.8% Fib-Time of the prior bull trend, another common level where corrections usually do finish.
As a trader, we have to act rationally and take decisions based on logical facts. We follow the information that the market gives to us, and to me, that information is very clear: A breakout occurred, we have price and pattern in our side for a long position, all we have to do now is to wait for a possible wave-2 to unfold and momentum to turn oversold on a daily basis to set our long entry orders. As soon as momentum gets OS on the daily time frame, look for a lower time frame, hourly for example, and wait for a bullish momentum reversal from OS level and PRESTO!
That said, gold developed a 5-wave bull trend starting Sep/28/2018, finishing Feb/20/2019. Since then, it's stuck inside a complex correction forming a descending wedge, as you can see on the chart below.
On May/13 price broke up the descending wedge in what was meant to be a wave-F in the complex correction structure. That fact poises the question: Is that a wave-F or a wave-1 of a brand new bull trend?
Well, as you can see on the chart, the complex correction brought price down to the range between the 38.2% and 50% Fib-Ret of the prior bull trend, a common level where corrections usually finish. Despite that fact, price is nearing the 61.8% Fib-Time of the prior bull trend, another common level where corrections usually do finish.
As a trader, we have to act rationally and take decisions based on logical facts. We follow the information that the market gives to us, and to me, that information is very clear: A breakout occurred, we have price and pattern in our side for a long position, all we have to do now is to wait for a possible wave-2 to unfold and momentum to turn oversold on a daily basis to set our long entry orders. As soon as momentum gets OS on the daily time frame, look for a lower time frame, hourly for example, and wait for a bullish momentum reversal from OS level and PRESTO!
Commentaire
Commentaire
As you can see on the chart above, the wave-2 seems to be unfolding as the dollar rallies, but the weekly momentum on the dollar is bearish and the upside may be limited, hinting the wave-2 will not take so long to be complete. If wave-2 does finish here, the minimum possible target for a valid wave-3 is the narrow range between the 261.8% expansion of wave-2 and 127.2% extension of wave-1(1320.545 - 1323.791) as shown on the daily chart below. So this narrow range will be the minimum target for the short-term unit.On the 3h chart, I've added the Fib-Rets of wave-1 (closing prices). Price has reached the range between the 38.2% and 50% level, a typical place where wave-3 usually starts. Momentum is OS and we had a bullish reversal on the 14:00 pm ET candle. Daily momentum is bearish coming from OB level, but as long as weekly momentum remains bullish, the daily momentum may return to OB level anytime the market requires. So, it's time to set long entry orders.
Trade management
Trade setup: Bullish breakout of descending wedge on complex correction after strong prior 5-wave bull trend, hinting on a trend continuation, possible beginning of 5-wave bull trend.
Longer time frame: Weekly; Daily.
Lower time frame: 3h.
I'll set two long entries. I call it a short-term unit and a long-term unit.
ST-Unit objective: Since the backdrop is for a wave-3 to develop, I'll consider the minimum target aforementioned as an exit point for the ST-Unit. So, when price reaches that narrow range, I'll trail the stop 1 candle low on the 3h chart on the ST-Unit.
LT-Unit objective: Since we're on the verges of a possible 5-wave bull trend, the LT-Unit will hold on until the end of the wave-5. That said, stops will be managed properly so that we can stay on the trend until the very end. I'll be updating the setup as it progresses.
If we do get a new daily low for the wave-2, all the aforementioned entry points will be cancelled and recalculated again.
Commentaire
Almost forgot to describe the entry points. There you go:Since we've got a momentum bullish reversal on the 3h 14:00 pm ET candle, I'll set the entry above the high of the previous candle at 1289 for both units, and the stops below the low of the candle prior to the bullish reversal at 1283.800, considering spreads.
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