4-Hour Chart Shows Bearish Arrangement – Rebound Seen as Bull Trap, Consider Shorting at Highs

Summary:

Gold prices edged slightly higher on Thursday, reversing some of the previous day's decline to multi-day lows; despite a lack of bullish confidence, the structure still supports the asset. Nevertheless, the rebound potential remains limited.

SELL XAUUSD

Close Time

CLOSED

2030.00

Entry Price

1975.00

2046.00

4812.39 -8.11 -0.17%

160.0

Pips

Loss

1975.00

2046.13

Exit Price

2030.00

Entry Price

2046.00

Fundamentals

Finding support near $2,000 within the descending trendline from the previous high, gold initiated a brief recovery wave above this range but now faces several obstacles.

Gold traded at lower levels with minor fluctuations on Thursday. The daily timeframe still leans bullish to a large extent, but as the price failed to create higher highs before the correction yesterday, I anticipate the formation of a new lower low. Breaking below $2,000 would be the primary target.

In the 4-hour timeframe, the price has breached a wedge pattern, with three moving averages converging to form a unified resistance, maintaining a bearish arrangement. Overall, I will await breakthroughs of other trendlines for appropriate entry into a short position.

4-Hour Chart Shows Bearish Arrangement – Rebound Seen as Bull Trap, Consider Shorting at Highs_1

Technical Analysis

Gold has been trading within the range of $2,011-$2,039 throughout this week, struggling to find sufficient buying interest to drive prices higher. This has created a trading logic of buying at lower levels and selling at higher levels.

With the price breaking below the new bull-bear watershed of $2,016 in yesterday's trading, the direction has started leaning towards the bearish side, aligning with our expectations from Monday.

Despite the breach of the new bull-bear watershed at $2,016, technical indicators show a neutral to bullish bias. The relative strength index (RSI) remains above the 50-neutral threshold, and the MACD has entered the positive zone. This suggests that the current consolidation still has the potential to move towards the weekly high of $2,039.

If the bulls manage to break above the weekly high of $2,039, it will slow down the current downward momentum and shift the price into a neutral phase. However, as mentioned, with the price breaking new lows, upward momentum will face significant challenges. Chasing the uptrend is not a wise move, and it's more likely that the price will retest the weekly high (possibly around $2,030) before trending downward.

If the price drops below the new low of $2,011 again, a new bearish wave may target below $2,000. Subsequently, support could be found around $1,975, near the lows of December last year.

Overall, unless the price breaks above $2,039, gold will continue to face downside risks. In terms of trading strategy, it's recommended not to chase long positions but to focus on shorting at higher levels.

Trading Recommendations

Trading Direction: Short

Entry Price: 2030

Target Price: 1975

Stop Loss: 2046

Valid Until: 2024-02-08 23:55:00

Support: 2009, 2000, 1998

Resistance: 2023, 2028, 2030

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