At the start of last week, I showed the “Arc Pattern” trendline boundaries that were forming at the peak of the intraday arc in gold prices, and this week, the arc continues right on schedule.
Let’s take a look at the updated/current “Arc” pattern and then see where that structure takes us on the daily support chart.
As I noted last week, the upper boundary was roughly $1,550 while the lower boundary was $1,525.
Price continued to respect these boundaries appropriately, giving intraday traders quick opportunities to play ’scalp’ moves off these developing trendline boundaries.
Not much has changed, as the boundaries now have defined themselves clearer this week to $1,545 and $1,525/$1,530 as seen above.
The analysis is the same – as long as price continues to respect (bounce between) these levels, then you have your “roadmap” or game-plan for intraday/short-term trading opportunities.
Should price break firmly through either of these boundaries, then it would suggest pattern completion and a breakout/impulse phase would emerge, allowing for Breakout trading strategies.
I had a fun post last Wednesday – “Wednesday with Wyckoff” – regarding basic breakout trading tactics.
So that’s the intraday structure – the “Arc” – but let’s take a look of where that leaves us currently on the Daily Chart:
Before discussing current levels, I wanted to show the example of the prior “Arc” pattern from February into early March 2011.
Though the ‘rally’ phase was longer than present, daily (and intraday) gold prices formed a similar arc with negative divergences inside the pattern (as we have now).
The downside action continued, culminating in a strong sell-off bar that slammed the rising 50 day EMA at the confluence of the $1,400 “Round Number” support zone.
The test of the confluence support ended the retracement phase, and price quickly broke the upper ‘arc’ trendline, triggering a breakout buy signal that preceded the April rally.
And now to the present – we have a well-defined arc that is now coming into the support at the rising 20d EMA at $1,530.
It’s possible buyers enter here to support prices at the 20 EMA, but if they fail to do so, expect a similar retest (deeper retracement) of the rising 50d EMA as what took place in March.
It would then be up to buyers again to try for a retracement buy at the confluence of the 50d EMA and the $1,500 “Round Number” support (strange how structure aligns like that again).
In other words, watch the current price at $1,520 and if there’s no rally here, then expect the ’rounding arc’ to continue, leading to another retest of the rising 50d EMA. Watch what happens at the 50d EMA at $1,500 for clues as to what to expect from there.
Continue watching gold on the hourly/intraday timeframe with regard to this arc formation and trade appropriately (don’t get ahead of the arc!).
Corey Rosenbloom, CMT
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