Gold (XAU/USD) has been compressing into a wedge directly above the previous all time high, which was broken after 9 years in August 2020.

The APEX of the wedge is fast approaching as traders and investors patiently await for the continuation break out on gold.

Wedge patterns are generally a sign of trend continuation when broken to the upside, and when found above previous highs can become quite potent.

 Key Points:

  • Price holding above the 200 EMA
  • Price holding above the 50 EMA
  • 6% Fibonacci Support Clustering with Previous 10 Year All Time High and 200 EMA
  • Flat pattern below breakout, once price retests 200 EMA, we have defined entry with risk below the pattern.
  • Must watch price behaviour around the 200 EMA
  • RSI hugging 50 mid-point

Key Levels:

Support – 50 EMA, 200 EMA, 1910

Resistance – 2016, 2085

Entry Zone:

Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.

Optimal Entry – 1930

Supporting Entry – 1950

Candle Reversals for entry

  • Bullish Hammer
  • Bullish Engulfing
  • Bullish PiercingCandlestick

 

The Risk:

As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.

If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.

 

IF: Price breaks below 1899.000 level, and violates the lower band of wedge– this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.

 

Reward / Reward Targets:

Optimal Entry 1930 – Target 1 2016 = 2.75x Reward to Risk

Optimal Entry 1930 – Target 2 2085 = 5x Reward to Risk

Supporting Entry 1950 – Target 1 2016 = 1.2x Reward to Risk

Supporting Entry 1950 – Target 2 2085 = 2.5x Reward to Risk