Figure 1.0 - Gold Channel - 1 Hour Time Frame
Gold has been contained within a channel from November 3rd until November 11th as seen in Figure 1.0 on a 1-hour time-frame (TF). Opportunities to go long would have had to break this upper channel trendline in attempts to catch an imuplsive upward move. Short opportunities were high risk as minimal trend reversal arguments could be made.
Figure 2.0 - Potential Head and Shoulders Pattern
Having pulled back from its channel, gold found support at November 9th's $1111.00 high. An impuslvive move to $1122.65 was observed followed by a quick return back to $1111.00 support. An head and shoulders pattern (H&S) could then be followed for the potential to short the re-test of the broken neckline. This pattern can be seen in Figure 2.0. It is not uncommon for traders to short the right shoulder using fibonacci retracement levels and other tools. A lower risk trade is to short the re-test of the broken neckline using proper money management. H&S patterns will often hit a target of the length of the head below the neckline. This would give an H&S target of $1099.35. An important psychological support level for gold also exists at $1100
FIgure 3.0 - Trendline Bounce
Gold was observed to hit resistance on an 8-hour TF trendline (TL) as seen in Figure 3.0. Continued downside from the top TL in the 1-hour channel and 8-hour TL increases the probability of a pull-back. The neckline of the H&S was poked before a right shoulder formed. Gold then returned to and broke the neckline at $1111.00 support and retested the "support-made-resistance" neckline where a low risk short trade presented itself. Gold then hit a low of $1100.40 before reversing.
Figure 4.0 - Working Head And Shoulder Pattern
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