Gold (XAU/USD) ain’t lookin’ too good right now.
Throughout last week, I was looking for strong follow-through, trying to see if there would be continued buying pressure to push gold’s price up further.
I had pointed out something that worried me though….the appearance of a shooting star!
Here’s the daily chart of gold that I posted last week:
I was worried about seeing that reversal candle form, so I tightened my stop loss, just in case gold had topped out and would now start to fall.
Well, that’s exactly what happened.
Gold DID fall from there. 👎
Not only did it FAIL to reach a higher high, but gold actually closed back BELOW $1700, totally negating the recent breakout I mentioned at the beginning of the post. 👎👎
And it gets worse. 👎👎👎
Check out the weekly chart (1W) of XAU/USD:
Look at how last week’s candle closed! 💀Price spiked upward near $1750 but then closed just a tad under where it had opened.
If you’re looking for bullish price action, this is NOT it!
That weekly candle is basically a gravestone doji.
This candlestick is even MORE bearish than a shooting star. 🐻🐻🐻
This doji candle indicates a struggle for buyers.
Prices moved above the open price during the (weekly) session but closed very near the open price (actually slightly below even).
Buyers seemed to have tried to gain control very early in the week, only to be pushed back by sellers from then on, with sellers winning by an inch (or a bear claw).
Is this a hint that sellers will overwhelmingly take over this week? 🤔
Another chart I like to look at to check whether the uptrend is still intact is the Heikin Ashi chart.
Let’s take a look at Heikin Ashi chart of gold on the daily (1D) timeframe:
Boohoo. More bad news. 👎
The recent strong uptrend shown by consecutive green candles.BUT now a red candle has appeared signaling at least a trend pause, and if not, the end of the recent uptrend.
So given all the bad news regarding price action, I’ve decided to get out.
I had moved my stop loss (SL) to $1674, which is a little bit over $9 away.
Rather than potentially lose more profit, I exited today at $1683.50
I could’ve just waited for my SL to get hit, but that’s still 950 pips at risk, and at $1/pip for a standard lot, that’s a pretty penny.
My entry was $1600 so I end up with a profit of $83.50 or 8,350 pips, a gain of 5.22%.
My initial stop loss (SL) was $1540, so given that my initial risk (R) was $60, I wasn’t too happy ending up with a 1.39R gain.
I try to shoot for 3R+ trades. For example, after the breakout, I thought gold’s next move would be to hit $1800. If I had exited there, that would’ve been a 3.33R gain (($1800 – $1600) / $60)).
That said, I can’t complain. I have to take what the market gives.
In retrospect, I probably should’ve exited after the close on April 16.
Your R-multiple is simply the amount that you profited (or lost) in terms of your initial risk. For example, if you bought gold at say $100 with the initial stop loss price of $50 and exited at $200, then you have a +2R (or “2R gain”).
That day, price traded higher than the previous day’s high but failed to hold and closed at $1718.35 near its open, forming another doji.
That would’ve given me a 1.97R gain. But whatever…coulda, woulda, shoulda.
Even though I think the price will fall from here, it’ll probably be temporary. The long-term trend is still up, so while it’s tempting to go short, it’s probably a big bear trap.
I still expect gold to rally to new highs as governments from all over the world flood the market with unprecedented levels of monetary and fiscal relief so I’m going to keep an eye out for any opportunities to jump back in.
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