GOLD - Long-term buy opportunity (end of ABC in primary degree)

1 sept. 2022

Hello traders, today we will provide a long-term trading idea. It is that long-term that you could use it as an investing idea and buy gold (the asset, not the derivative) and hold it.

The chart shows you the corrective pattern that started in July 2020 is in the last stages and it can be ending soon. The price is now in wave 5 in the intermediate degree (blue), which will end the whole corrective structure ABC in the primary degree (green) and after that, we expect the motive bullish wave 5 in the cycle degree (orange) will start.

We will be monitoring this asset when the targeted price for this correction to end is reached (1672 is the level). From this point, we expect that the gold will end the corrective cycle at any time and will start a rally. The zone where this turn would happen is from 1671 to 1373. It is a huge zone, this is due we are dealing with a daily time frame structure and even though the size of the zone is large, it is also the potential target. We cannot define precisely the target yet but it would be above the 2200 level.

We do have a trading system that reduces a lot the size of the zone (not the target, therefore, the R:R ratio increases a lot). If you have a trading system (supply and demand zones, volume profile, set of rules of indicator…) you can apply it when the price is inside this green zone and the chances the trade will succeed will increase a lot.

Important note: it is a daily zone, use the signals that trigger the trade according to it (a 5 minutes signal probably will not be strong enough to turn a daily structure)

Reasons why we believe it is going to work:

1- The Corrective structure is clear and the chances that this ABC structure becomes an impulse and stops us out are, at this moment, low. We will monitor it in any case and update you.
2- The USD cycle- The USD is approaching the end of a cycle where it has been dominated by USD strength. When this cycle ends, a cycle where the USD is going to be weaker will start and this will help all the commodities priced in USD, and of course, gold is one of them, to have a bullish cycle that could be pretty powerful. This trade is long-term, so we should not expect a rally in gold in the following days, it can take a few weeks for the gold to end the corrective structure and also for the dollar to end the bullish cycle.
3- The FIAT currencies situation. Central banks have been continuously printing money which has devaluated, at least in common people’s perception, the value of the currencies. This can push investors and common people to buy gold to try to keep their savings protected from a potential hyperinflation of the currency of their savings.
4- Gold is not infinite– The quantity of supply of gold is not infinite and it is difficult to be massively manipulated. Therefore, gold will always have value and these supply constraints will make the gold more difficult to have a significant collapse in the price. In addition, gold has the perception of a value preservation asset. So, in case of an economic crisis (which is predicted in some parts of the world), it can increase the demand for gold.

Always keep in mind that risk management is, at least, as important as the entry-level or the SL. Remember the quote “If you do not manage the risk, you will not have any risk to manage”

The market is always repeating the same type of defined structures. There are only two main wave types: the motive wave and when the motive wave ends it starts a corrective wave. Within them, there are only 3 motive waves structures (Impulse, leading diagonal, and ending diagonal) and 5 main types of corrective structures (ABC, WXY, Flats, triangle, WXYXZ (triple correction))

Learning them and being able to spot them in the price action graphs will completely change the way you trade as these structures will provide entry point areas, invalidation levels, and targets for the trade.

Have a safe and profitable trading day

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it is only the explanation of what we are going to do and it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.