Bearish Signal from "Head and Shoulders" Pattern in Small Timeframe

Summary:

As risk appetite increases and bulls become cautious, gold prices triggered a bearish signal after testing the intraday high of $2,458.

SELL XAUUSD

Close Time

CLOSED

2446.00

Entry Price

2329.00

2499.00

4999.06 +33.02 +0.66%

196.0

Pips

Profit

2329.00

2426.40

Exit Price

2446.00

Entry Price

2499.00

Fundamentals

The potential for further growth in long gold positions is limited. The long positions held by institutions and investors exceed the level justified by market pricing for a Fed rate cut, suggesting an overbought condition in the market. In fact, institutional traders hold the largest long positions, indicating limited room for increasing positions and pushing prices higher without re-leveraging.

While central banks continue to purchase gold, investors remain cautious, with only preliminary signs of buying observed in recent trading days. The fluctuating prices of Asian currencies have reduced gold's attractiveness as a hedge against currency depreciation.

Although safe-haven buying related to Middle Eastern geopolitical risks may support gold prices, the dynamics of current positioning also limit the potential for further long positions. Unless geopolitical tensions escalate significantly or market bets on a Fed rate cut deepen, it is not advisable to hold excessive long positions.

Bearish Signal from "Head and Shoulders" Pattern in Small Timeframe_1

Technical Analysis

Gold prices retreated after testing the recent high of $2,458 during the Asian session on Thursday. In yesterday's strategy, we noted that the lack of resonance between the short and long-term cycles would limit the upside potential for bulls, and today's significant pullback after testing the intraday high in the Asian session confirms this view.

Despite the 4-hour technical chart maintaining a bullish stance, early signs of a "head and shoulders" pattern have appeared in the hourly and shorter time frames, indicating a bearish signal. Therefore, it is advisable to go short at higher levels with a stop loss set at $2,452.

Furthermore, with the US July non-farm payroll report due tomorrow, the battle between support and resistance will be intense over the next 24 hours. If prices trigger the $2,452 stop loss level, bears must step aside and wait for the price to form a higher high before continuing to short.

Trading Recommendations

Trading Direction: Sell

Entry Price: 2449

Target Price: 2329

Stop Loss: 2499

Valid Until: 2024-08 - 16 23:55:00

Support: 2412, 2403, 2386

Resistance: 2430, 2446, 2456

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