Gold appears to be building energy ahead of the next phase of expansion. Here are the key levels to watch.
1293.70 is Still the Big Level
I wrote about the recent moves in Gold [COMEX: GCQ14] about a month ago, wherein I provided a detailed look at various key levels and how buyers and sellers were positioning themselves according to the levels. You can find the post here: Nailing Gold Via Anticipation. It’s definitely worth another look.
Perhaps the most interesting takeaway from the post is the fact that the Gold market continues to honor many of these same levels, including the biggest key level of them all at 1293.70, which is the micro composite volume point of control (MCVPOC). As you may recall, Gold was coiling tightly around 1293.70 for weeks before finally going offered into 1240. Buyers defended 1240 and later squeezed the shorts through 1293.70, which sparked a significant rally into 1347. Gold was unable to gain acceptance above 1340 and later sold off back to 1293.70 before experiencing the recent rally.
In essence, 1293.70 has become the most significant key level in Gold over the last three months, and the recent defense of this level by responsive buyers suggests a squeeze into 1359 could be seen ahead.
Inside Day Pattern Suggests Expansion
The daily chart shows Gold has formed an Inside Day pattern, whereby the current session’s range closed within the prior session’s range. In fact, Gold has actually developed the less common double inside day pattern (or Inside Day 2), which confirms even more significant price coiling action.
Typically speaking, it doesn’t matter which way price breaks for this pattern to deliver significant results, as expansion from an inside day pattern can lead to breakout moves of 1 to 3 days, or more. The key will be watching 1305 and 1320 for early directional bias.
Key Levels to Trade
Given the recent defense of MCVPOC at 1293.70, it appears that price is gearing up for another short squeeze ahead. Responsive buyers defended 1293.70, and are currently defending the LVN at 1305. Any pullback into 1300 to 1305 offers a buying opportunity for a shot at 1325, and beyond.
Here’s the thing, responsive sellers are defending prior MCVPOC at 1318.80 up to 1325, which means they are absorbing demand in this zone in hopes of returning price to 1293.70, and lower. There has been three days of this behavior, meaning the upside buy stops are definitely building up. Buyers will look to run the upside buy stops above 1325 in hopes of squeezing the shorts out of their positions, with upside targets at 1333.90, 1342.60, and 1359.
Failure to hold above 1300 begins to run the sell stops of the buyers who are defending 1293.70, which could trigger a sell-off into 1280.40, with scaling points at 1284.30 and 1293.70.
Cheers!
Frank Ochoa
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