Gold price has collapsed yesterday towards my lower target of $1,120 and has hit the long-term support trend line from $1,080. The pause of the decline at that area is a good sign. It implies that the support at $1,120 is respected and important. A bounce of higher highs and higher lows is now what we are looking out for.
Blue line – long-term support trend line
Gold price remains below the Ichimoku cloud. Stochastic is oversold on the 4-hour chart and price has reached the 78.6% retracement and the upward sloping trend line support from $1,080. We are now looking for entry levels for long positions. We want to see a short-term pattern of higher highs and higher lows in order to establish a stop level. Traders eager to buy now should use $1,100 as stop.
Let us also not forget the bigger picture. Gold price is at the long-term 50% Fibonacci retracement. However weekly chart remains below the cloud. A long-term reversal will be confirmed when price breaks above the cloud.
Blue line – trend line support
Gold price needs to hold above the weekly trend line support. If it breaks below it in a weekly close, then we should expect new lows to come near $1,080-60. Overall, this is an area where I prefer to look out for buying opportunities.
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