Gold prices completed their counter-trend rally on Thursday and found confluence resistance at the 38.2% Fibonacci retracement along with the 20 day EMA.  Let’s see this event and see if we can make out a weekly Elliott Wave count structure as well.

Gold Daily Prices:

If there ever was an ‘anatomy of a sell signal,’ Gold provided it this week.  Price formed a new momentum low last week and then began a sharp retracement back to the upside.  What was the target for the retracement?  It was the 20 period EMA as I pointed out at the time.

Price retraced quickly to this level which formed powerful “Confluence” Resistance as the 38.2% Fibonacci retracemen coincided with the falling 20 day EMA about the $779 level.  Combine this with two “long-legged” or long upper-shadow candlesticks and you have an ultimate short-term sell signal (highlighted in green).

Price is still in a downtrend and we still need to work off the recent new momentum low (meaning a new momentum low often precedes a new price low… or that with the new momentum low, a new price low is perhaps yet to come).

Where might price find support (or where is the target for this current short-sell trade)?  Initially, it’s the old $680 low but let’s raise the time frame to the weekly chart for possible additional clues… and a favored Elliott count.

Gold Weekly Prices:

Ignoring Elliott for a moment, we have the rising 200 week moving average coming in around $650 per ounce.  Let’s set this as our target for the swing.

Picking up with the possible Elliott Wave count, we’re currently in Wave 5 down, and are deep in Wave 5 at that.  The $650 to $675 rough area is a decent target for the wave to end.

The one major caveat to this count is that labeled Wave 4 dipped into the price territory of Wave 1 which violates the basic Elliott principles.  Some Ellioticians allow 4 to enter wave 1 in regards to futures markets due to their leverage, but it is far more appropriate not to have to use this situation, meaning the above count may need to be altered.

Perhaps my Wave 1 down was actually an “A” Corrective Wave with Wave 2 being the “B” corrective wave and then my labeled Wave 3 is actually the “C” corrective wave – and that perhaps a complex correction is forming.

Let’s see if this possible structure plays itself out in the coming weeks.

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Published by Corey Rosenbloom of Afraid to Trade.

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