Gold was unable to continue to carry a bullish bias after making a January 22nd high of $1,307.80. The near 6-month high has been followed by a strong bearish drop as the U.S. dollar continues to continue soar and expectations grow for the Federal Reserve to hike rates possibly this summer.
The current descent is finding tentative support from the 100-day SMA, which is trading around the $1,218 level. While we may see a modest bounce, the bearish trend could accelerate if price quickly breaks below the noted level. If the rebound continues, sellers may look to defend the 50-day SMA at $1229.40.
If by the end of the week, price is trading below the 200-, 100-, and 50-day SMAs, we could see price immediately target the $1,200 handle and possibly find further support from the $1,167 region which is the current 2015 low.
The bullish bias is unlikely to return unless a major risk-off event occurs such as Greece and its European lenders not reaching an agreement over the next couple of weeks.
The trade: Sell Gold at $1,229 with a stop loss at $1,239 and a take profit at $1,209. The Risk/Reward Ratio is 1: 2
Edward J. Moya
WorldWideMarkets Online Trading