Today the gold futures were on the Buy day of the Taylor Trading cycle. I’ve been look for a break to buy in the gold; today’s early selloff was a good opportunity to do so.
Gold has rallied since mid-December, moving higher on a combination of rising inflation expectations, comments from the Trump administration that the US Dollar is too strong (notable comments have been directed at China and Germany) and concerns about global trade.
This week on Wednesday we saw a breakout rally to a 2017 high. The Taylor trading cycle anticipates a Sell Short day following a breakout rally, and there was as big decline on Thursday.
By the Taylor Trading cycle, we would anticipate a Taylor Trading Buy day for Friday. We look for an early session move below the previous day and then an upside reversal, which becomes a significant rally. We go long when the market moves back above the previous low.
April gold futures traded lower overnight, making a session low of 1222.60. By the time I was writing the morning STI watch list, it was back above the Thursday low; I suggested we look for either another move below the Thursday low of 1226.10 or a move above the $1230 level, which I have viewed as a pivot point this week.
Around 8:20 AM gold moved below the Thursday low; the subsequent rally back over it was our trigger for a long entry. The initial stop loss could be placed either under the morning low of 1225.20 or the session low of 1222.60.
By 8:45 it pushed above $1230. Depending on what you were looking for you could have used this to take profits or to add to longs. By 9:20 it nearly reached the Fibonacci retracement objective level at 1234.60, and this was taken out about an hour later.
Short term traders could look to take profits today and look for another break to buy. Longer term traders might carry longs home tonight; there’s another Fib level around 1235.50, the longer term trend is up and it doesn’t appear overbought (looking at the ROC on the daily chart).
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