Gold futures saw a 60-handle rally from our 1184 buy zone, but will bulls be able to withstand the next bear attack?
60 Handles in 2 Weeks
Gold futures [COMEX: GCZ14] rallied big off our 1184 key level just two weeks after I wrote the article “Gold Set to Rally” on October 6, where I wrote, “Given the rejection that has been seen in Gold off the 1180s in recent years, it’s not out of the question for price to see another round of strength back toward the top of the 2-year trading range at 1349…In essence, we could see a 165-point rally over the next three months heading into the end of the year, with scaling points at 1244.50, and 1290.10.”
Remember, “pigs get fat, hogs get slaughtered.” So if you participated in the rally from 1184, the first target at 1244.50 is there to take profits and be completely risk-free from here on out in the rest of the position. The last two bounces off the 1184s produced moves of over 200 points apiece, so this 60-handle rally could be the beginning of more strength to come, likely into 1290.10 and 1349.
However, bears are hoping to keep a lid on 1248s, which gives us another story-line to read.
Bears Eager to Defend 1248
In that same article from October 6, I also wrote, “Gold has been extremely bearish since topping out above 1900 in September of 2011. Every rally has been a bear market rally so far, so sellers still have the upper hand in the longer term picture…Bears will be looking to defend MCVPOC at 1244.50 upon its first retest, for a shot at running the downside sell stops through 1184s.”
After finally taking price offered through 1244.50 in September, which ultimately sparked the sell-off into 1184, bears will be looking to defend the next retest of this zone — which is happening right now. After a few days of trading in this zone, MCVPOC has now shifted higher to 1248 from 1244.50, making it value and the current key level that bears are defending.
Short term, the bears need to take out 1236, which is the midpoint of the prior week’s range. The bulls were able to defend the first test of this level, which sparked a squeeze into 1248 during Monday’s action.
Failure to take out 1236s implies the bulls have the upper hand in the short term, with a shot at squeezing bears through 1250 and into the next upside key targets.
The Game Plan
After having pocketed a 60-handle rally off 1184s, Gold bulls will be looking to defend all pullbacks down to 1215.80 for a shot at our second target at 1290.10, and in anticipation of reaching the ultimate upside objective of 1349. Gold bears are looking to defend 1248 and 1262 for a shot at running stops through 1236 and into 1215.80 and lower.
Cheers!
Frank Ochoa
Author of the book Secrets of a Pivot Boss