Gold surprised both bulls and bears with high volatility and “gappy” price movement this week.
Let’s put the rapid price action in a bigger context and highlight what to do about it.
Here’s Gold “Gone Wild” on the 15-min intraday chart:
On the intraday chart, we see gold downtrending from the $ 1,85 level (early December) to the current new low under $ 1,050.
In the middle of this downtrending move, price has gapped higher, lower, reversed on a dime, and just generally given traders a fit.
Yesterday saw a large upside gap and one-day swing from $ 1,060 to the $ 1,077 level in mere hours.
The post-Federal Reserve volatility was choppy and preceded today’s gap-down and collapse under $ 1,050.
Only you can determine what is too volatile and when to stand aside from a particular market.
In the context of high and seemingly random volatility, it’s often helpful to rise to higher timeframes and decrease position size.
Here’s the broader perspective as seen from the Daily Chart:
We cover gold in much more detail in the Weekly Intermarket Membership – check it out for more information.
Let’s start with the realities of gold’s chart at the moment.
1. Gold is Downtrending
Price continues to form a series of lower lows and lower highs in a downtrending environment.
2. Gold is Challenging a Key Support Pivot
The $ 1,050 level is the focal point for traders at the moment just like $ 1,080 was in July 2015.
Ultimately, buyers will see value and step in, boosting the price higher “up away from” this pivot or the alternate scenario would be that bears (sellers) overpower buyers, resulting in another breakdown under support.
If $ 1,050 fails to hold as a key support level, then look for another breakdown impulse toward $ 1,000.
Finally, realize that gold is behaving erratically in terms of price action on the lower frames.
Tighten stops, reduce position size, and consider trading from the higher timeframes as solutions.
As always, be safe.
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Corey Rosenbloom, CMT
Afraid to Trade.com
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