Gold Attempts to Break Out
For those who bought the break out, this is not a comfortable position to be in, even though the broader price structure and fundamentals favor a bullish move. The reason? The reward/risk is NOT attractive here for a short term swing trade.
Do not let fundamentals or hype fool you or force you into some useless opinion. No matter how bullish gold “should” be, it can still very easily retrace and test of the middle of the broad consolidation that it has been gyrating within for weeks. Previous retracements have gone as low as 1670 and 1700 respectively even in this bullish gold environment. The bearish pin bar is not to be confused with a trend reversal, but it is pointing to potential bearish momentum at least for the next couple of days or going into early next week.
Your capital is at risk
IF the bearish momentum follows through, it is within reason for price to test as low as the 1720s which would provide a much more attractive location for a new buying opportunity. Since we have only 1/3 of our recent XAUUSD swing trade (two targets were reached), we will let the position ride and see how it plays out. IF a new buying setup appears around the support level I just mentioned, we would be open to increasing our current position by 1/3 and look for another range break out attempt
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This article was written by Marc Principato CMT, Executive Director at economic calendar