WWM - Analytics


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    Today’s Trading Edge: Gold rallies above $1,300 and forms bearish butterfly pattern


    Gold prices rallied in New York as expectations grow that the Federal Reserve will maintain a low interest environment and the idea of a June rate hike is fading.  Today, the US April Final Markit Manufacturing PMI reading printed a 50.8 reading, in-line with expectations, but still the lowest reading since September 2009.      

    Price action on the gold daily chart shows that the recent rally stemmed a bullish Gartley pattern.  Point D was targeted with the 78.6% Fibonacci retracement level of the X to A leg and the 141.4% Fibonacci expansion level of the B to C move.  The bullish leg tentatively rallied above the $1,300 level and has tentatively formed a bearish butterfly pattern.  Point D is targeted with the 127.2% Fibonacci expansion level of the X to A leg and the 200.0% Fibonacci expansion level of the B to C move.  If valid, we could see price reverse towards the $1,275 level.  If the pattern is invalidated, major resistance will come from the $1,325 level. 

    If we see a major bounce back for the US dollar, gold prices may drop even further and find key support from the $1,245 zone. 

    The trade: Sell Gold at $1,305 with a stop loss at $1,315 and a take profit at $1,275. The Risk/Reward Ratio is 1:3

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