The first few weeks of the year have favoured break-out traders over bounce traders which you’ll certainly have noticed if you followed my last post which predicted the top of both FTSE and USDJPY…. we’re still waiting for those tops, but such is life.
So here’s an idea that takes in the best of both worlds, relying as it does on both break and a bounce style methods.
The gold price has been in a down trend since October and has now formed a descending triangle. That is, the highs are getting lower but the lows have found a support level which draws out a triangle with a horizontal base.
This is a classic continuation pattern which expects the downward pressure of the trend to break the support level for a confirmed short trade. That’s the break trade, which if you’re aggressive is certainly valid, but I prefer a bit more caution so I’ll be waiting for price to come back up and test the old support as new resistance before selling the break of that bounce.
This is a very early heads up so the trade may not set up, or it does but not yet (it could run another cycle inside the triangle before breaking south). I’m pointing it out now because if it does pan out, it’s a high probability trade.
And we like those!