Gold made a strong pull back yesterday from 1,338 to 1,320 breaking the short-term support. The upward sloping trendline was broken but the important support at 1,300 still holds. Prices have risen as much as the 50% retracement and if we look at this having a short position, then we could say that the upward correction can be over and prices will be starting a new downward move.
Bulls, on the one hand, see the support at 1,300-1,310 holds, but bears, on the other hand, see that prices pulled back down from the 50% retracement. It is very possible to see another move upwards towards 1,340-45, but for now we remain neutral as the current price action and the price pattern does not provide us with a good risk/reward opportunity. Important levels for trading are 1,291 and 1,375. If prices break any of these two levels, then we should expect a big move. If prices move close to these levels, we should take action in favor of the support or resistance. For example, if prices move towards 1,300 and support holds, then we should take action in favor of the support by buying with 1,291 stop reverse. The opposite, if prices move towards 1,645-50, where the 61,8% and 76,4% Fibonacci resistance levels are, we should sell with 1,375 as stop reverse.
Concluding we remain neutral now, as the short-term support has failed, as prices could move lower towards 1,300 and give another buy opportunity. Until then we remain on the sidelines waiting for a good opportunity to come once a signal is given.
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