Key reversal in Gold after a double zigzag correction
It has been a pretty deep six month correction in
XAUUSD
. The only valid interpretation of this corrective move in accordance with Elliott theory appears to be a double zigzag W-X-Y.
This double zigzag subdivides into two actionary zigzag waves A-B-C intervened by simple reactionary X, which is a corrective wave itself.
According to an introduced count, we have an impulse-triangle-impulse representation of both A-B-C sequences. Where B waves are both running triangles, implying subwave b going below the end of wave A, previous impulse low.
As
XAUUSD
has completed another triangle (which always occurs in a position prior to the final actionary wave) inside an impulse wave C, we are going to have a 20 point decline to complete subwave v. As impulse C has 3rd subwave iii extended, I expect subwave v to be equal to subwave i, which is also equal the height of triangle in subwave iv. Thus we have to arrive to over target and long position entry point @ 1115.x
In a zigzag, the length of wave C is usually equal to that of wave A, although it is not uncommonly 1.618 times the length of wave A. This relationship applies to a second zigzag relative to the first in a double zigzag pattern. As one can see, we have closely approached this target @ 1120.x. Gold rarely bounce right of the targets, more common behavior is to penetrate a target and take one's stops out first ;)
I suggest to look this subwave v evolves, making an RSI divergence between subwave iii and subwave v. Daily RSI(14) have been in an oversold territory for a while, but the recent sharp move to 1223.x took it to 20 level and then it bounced back, creating a good opportunity to form a divergence. One can also take a look at 15m TF, count subwaves of this last impulse subwave v and spot some divergence between 3rd and 5th subsubwaves for more precise entry.
As a confirmation we have 78.6 retracement of the bullish move from 1046 low @ 1116.x and a longterm trendline from 2006 or 2008 local lows @1106-1122 area depending on what scale one use. CoT report also suggests the possibility of reversal as producers cut more then 60% of their net positions (which appears to be short) throughout this decline. Seasonality is also in favour of Gold after a New Year as the inflation picks up after a holiday/sale period.
For my first entry @ 1115 I'm going to place a stop around 1107, just below previous market structure extremums.
The target for this longterm trade really depends on where we are at. Either next up wave will be a wave C circled of bearish A-B-C circled correction or wave III braced of a bullish 5 wave advance. In first case wave C circled could be equal or a 1.618 v 0.618 product of wave A circled. In case of bullish wave III braced the target couldn't be set before we will see the subwaves developing.
I hope it isn't the case, but keep in mind a triple zig-zag correction, which is less probable but still possible, which could take us even below 1046 lows. Anyway now we need to bounce.
Trade safe, cut your losses short and let your profits run.
Cheers!
XAUUSD
. The only valid interpretation of this corrective move in accordance with Elliott theory appears to be a double zigzag W-X-Y. This double zigzag subdivides into two actionary zigzag waves A-B-C intervened by simple reactionary X, which is a corrective wave itself.
According to an introduced count, we have an impulse-triangle-impulse representation of both A-B-C sequences. Where B waves are both running triangles, implying subwave b going below the end of wave A, previous impulse low.
As
XAUUSD
has completed another triangle (which always occurs in a position prior to the final actionary wave) inside an impulse wave C, we are going to have a 20 point decline to complete subwave v. As impulse C has 3rd subwave iii extended, I expect subwave v to be equal to subwave i, which is also equal the height of triangle in subwave iv. Thus we have to arrive to over target and long position entry point @ 1115.x In a zigzag, the length of wave C is usually equal to that of wave A, although it is not uncommonly 1.618 times the length of wave A. This relationship applies to a second zigzag relative to the first in a double zigzag pattern. As one can see, we have closely approached this target @ 1120.x. Gold rarely bounce right of the targets, more common behavior is to penetrate a target and take one's stops out first ;)
I suggest to look this subwave v evolves, making an RSI divergence between subwave iii and subwave v. Daily RSI(14) have been in an oversold territory for a while, but the recent sharp move to 1223.x took it to 20 level and then it bounced back, creating a good opportunity to form a divergence. One can also take a look at 15m TF, count subwaves of this last impulse subwave v and spot some divergence between 3rd and 5th subsubwaves for more precise entry.
As a confirmation we have 78.6 retracement of the bullish move from 1046 low @ 1116.x and a longterm trendline from 2006 or 2008 local lows @1106-1122 area depending on what scale one use. CoT report also suggests the possibility of reversal as producers cut more then 60% of their net positions (which appears to be short) throughout this decline. Seasonality is also in favour of Gold after a New Year as the inflation picks up after a holiday/sale period.
For my first entry @ 1115 I'm going to place a stop around 1107, just below previous market structure extremums.
The target for this longterm trade really depends on where we are at. Either next up wave will be a wave C circled of bearish A-B-C circled correction or wave III braced of a bullish 5 wave advance. In first case wave C circled could be equal or a 1.618 v 0.618 product of wave A circled. In case of bullish wave III braced the target couldn't be set before we will see the subwaves developing.
I hope it isn't the case, but keep in mind a triple zig-zag correction, which is less probable but still possible, which could take us even below 1046 lows. Anyway now we need to bounce.
Trade safe, cut your losses short and let your profits run.
Cheers!
Comment:
@Bandarsq draw my attention to the following possible wave alternations here. It would be even better, and in accordance with wave length and price targets
Comment:
I believe Gold is in wave 3 of 5 wave final move down
I believe Gold is in wave 3 of 5 wave final move down
Comment:
It became clear, as we start our final impulse with leading diagonal