My July 28th gold post highlighted the major wave of downward pressure took the precious metal to a 5-1/2-year low. After following the longest weekly losing streak, I identified a bullish butterfly pattern that called for a significant rebound.
Price action on the gold daily chart shows point D was targeted by the $1,072.30 low, which is both the 127.2% Fibonacci expansion level of the X to A leg and the 161.8% Fibonacci expansion level of the B to C rally. Now that have passed both the Federal Reserve meeting and NFP, we could see the rebound continue a little longer before we see the overall bearish trend reassert itself.
Further downward pressure could eventually target the $1,050 level, with deeper support coming from the psychological $1,000 handle.
Major resistance still remains at the $1,195-$1,205 zone. If you are still long from the prior post, you may want to bring your stop to breakeven ($1,090).
The trade: Buy Gold at $1,095 with a stop loss at $1,075 and a take profit at $1,135. The Risk/Reward Ratio is 1: 2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading