Gold Technical Analysis: Double Top, 4,013 to 3,858 Scenario

Two highs from last night have already fixed today's levels. 4,148.60 on 9 November. 4,146.696 on 10 November. One session apart, 1.9 dollars between them. Pattern traders will call it a double top, and I agree. But a double top does not forecast direction. It tells you where the neckline sits and, once that gives way, how far the measured move runs. The neckline is the low between the two peaks: 4,026.038, the 6 November low. Last night closed at 4,032.62, about six dollars above it. One: the measured move, 3,903 Height = 4,148.60 minus 4,026.038 = 122.56. Neckline minus height = 4,026.038 minus 122.56 = 3,903.48. On its own that number means little. Put it beside other work and it gets interesting. Hui Tong's technical note at 00:34 on 11 November put the 20-day Bollinger lower band at 3,900. Wang Yang's long piece at 09:02 on 11 November called the market a 3,900-4,200 range, with strong support at 3,950-3,900. My own measured move is 3,903. Three sources, three methods, landing inside three dollars of each other. When different approaches converge on one shelf, that is worth writing down. Two: Scenario A, 4,000 holds Condition: a close back above 4,000, with real bids absorbing the 4,026-4,000 zone during the Asian session. Path: a 4,000-3,990 base, a bounce to 4,059, the 20-day mid. That level should stall first, because yesterday closed below it and supply sits there. Reclaim 4,059 and 4,080 - the thickest offers on the OANDA book - comes into play. Above that, 4,147. Risk and reward: enter 4,000, stop 3,970, exit 4,080, which is 2.7 to 1. Workable. Three: Scenario B, 4,000 breaks Condition: a push under 3,990 with no bounce, or a close below 4,000. Path: 3,970, WGC support; then the 3,950-3,903 convergence zone; then 3,858. Note that 3,903 and 3,858 are not the same thing. 3,903 is a pattern target. 3,858 is the retracement of the entire advance. The first is a swing objective, the second is a trend-level threshold. A drop to 3,903 can still be a correction. A drop to 3,858 forces a different conversation about whether this rally is finished. Four: why I do not expect 3,903 in one go Yesterday travelled 133.5 dollars, from 4,146 to 4,013. The Asian session so far has travelled 24.7, from 4,026.24 to 4,050.95. That is not apathy. It is both sides unwilling to move first. Shorts are afraid of the 4,000 bids. The OANDA book showed the heaviest buy orders sitting near 4,000, with sell stops stacked at 4,010 and 4,000. A break would accelerate, but chasing it afterwards is a different trade. Longs are afraid of PPI on 13 November. If PPI beats as well, 50bp odds are no longer 13.6%. So the likelier path is two or three days of chop between 4,000 and 4,080 while the market waits for PPI. Five: invalidation Scenario A dies if we close below 4,000 two days running. Switch to B. Scenario B dies if price reclaims 4,080 and holds. Switch back to A's second leg. Writing down the invalidation matters more than writing down the targets, because targets are guesses and invalidation is observable. Six: a detail that gets confused Yesterday New York gold printed two numbers: a close of 4,040.50 on the December contract, and a settlement of 4,030.20. Ten dollars apart. That is why you saw both "down 1.80%" and "down 2.62%". The first is the COMEX close; the second is London spot closing at 4,032.62, down 2.62%. Nobody reported it wrong. The instruments and the conventions differ. Sorting that out saves half the confusion when you read the tape. Last Do you trade the pattern or the headline? I use the pattern for levels and the news for direction, and I only act when the two agree. Tell me how you do it. Structural read, not investment advice. No return is promised or implied.

Related

Check out more trading insights in the Trading Journal.