Overview of the Chart & Market Context
The 1-hour chart of Gold (XAU/USD) reveals a classic Head and Shoulders (H&S) pattern, a well-known bearish reversal formation. This pattern suggests that the recent uptrend has lost momentum, and a potential downside move could be in progress.
Currently, the price is testing the neckline, which serves as a key support level. If a decisive breakdown occurs, it could confirm further bearish momentum, leading to a sharp decline toward the projected target price of $2,995.
Key Technical Analysis & Levels
🔹 Resistance Level & Reversal Zone (~$3,055–$3,060)
The price attempted to break this resistance but faced strong rejection, forming the head of the pattern.
The area was tested multiple times, confirming that sellers are in control.
This level acts as a supply zone, preventing the price from moving higher.
🔹 Support Level (Neckline of H&S Pattern at ~$3,025–$3,030)
This level represents the critical neckline, which has been tested multiple times.
If price breaks and sustains below this support, the H&S pattern will be validated, signaling a deeper drop.
A successful retest of the neckline as resistance could provide an optimal shorting opportunity.
🔹 Projected Target Price (~$2,995)
The expected downside move is calculated using the measured move technique, measuring the distance from the head to the neckline.
This target aligns with previous structure support, increasing its significance.
Detailed Breakdown of the Head & Shoulders Pattern
📍 Left Shoulder Formation
The market experienced an initial bullish push, reaching a local high, but sellers entered and pushed prices down.
This formed the first lower high, hinting at potential weakness in the bullish trend.
📍 Head Formation
After retracing from the left shoulder, buyers made another attempt to push prices higher.
The price formed a new peak, but it was unable to sustain the breakout above the resistance level (~$3,055–$3,060).
A sharp sell-off followed, reinforcing that sellers are dominant at higher levels.
📍 Right Shoulder Formation
The price attempted another rally but failed to break the left shoulder’s high, creating the right shoulder.
This failure confirmed a gradual loss of bullish strength.
After forming the right shoulder, the price began to drop toward the neckline support.
📍 Breakout Confirmation & Bearish Price Action
The price has now broken the neckline (~$3,030), indicating an early-stage breakdown of the H&S pattern.
If the breakdown holds, further downside movement toward $2,995 is likely.
A retest of the neckline as new resistance would be an ideal entry point for short positions.
Trade Setup & Risk Management
📌 Potential Short Trade Setup:
Entry: After a confirmed break and retest of the $3,030 neckline.
Stop-Loss: Above the right shoulder (~$3,045–$3,050) to minimize risk.
Take-Profit: Around $2,995, aligning with the measured move.
📌 Risk Factors & Market Conditions:
If the price fails to hold below the neckline, it could indicate a false breakdown and a possible bullish reversal.
Macroeconomic data (such as interest rates, inflation, and geopolitical tensions) may impact gold prices.
Traders should watch for volume confirmation – increased selling pressure strengthens the validity of the breakdown.
Final Thoughts & Market Outlook
📉 The Head and Shoulders pattern signals that gold is losing bullish momentum, with a potential drop toward $2,995.
🔍 A break and retest of the neckline as resistance would confirm further downside movement.
⚠️ However, a failed breakdown could lead to a recovery, so traders should wait for confirmation before entering trades.
💬 What do you think about this setup? Are you going short on gold? Drop your thoughts in the comments below! ⬇️
The 1-hour chart of Gold (XAU/USD) reveals a classic Head and Shoulders (H&S) pattern, a well-known bearish reversal formation. This pattern suggests that the recent uptrend has lost momentum, and a potential downside move could be in progress.
Currently, the price is testing the neckline, which serves as a key support level. If a decisive breakdown occurs, it could confirm further bearish momentum, leading to a sharp decline toward the projected target price of $2,995.
Key Technical Analysis & Levels
🔹 Resistance Level & Reversal Zone (~$3,055–$3,060)
The price attempted to break this resistance but faced strong rejection, forming the head of the pattern.
The area was tested multiple times, confirming that sellers are in control.
This level acts as a supply zone, preventing the price from moving higher.
🔹 Support Level (Neckline of H&S Pattern at ~$3,025–$3,030)
This level represents the critical neckline, which has been tested multiple times.
If price breaks and sustains below this support, the H&S pattern will be validated, signaling a deeper drop.
A successful retest of the neckline as resistance could provide an optimal shorting opportunity.
🔹 Projected Target Price (~$2,995)
The expected downside move is calculated using the measured move technique, measuring the distance from the head to the neckline.
This target aligns with previous structure support, increasing its significance.
Detailed Breakdown of the Head & Shoulders Pattern
📍 Left Shoulder Formation
The market experienced an initial bullish push, reaching a local high, but sellers entered and pushed prices down.
This formed the first lower high, hinting at potential weakness in the bullish trend.
📍 Head Formation
After retracing from the left shoulder, buyers made another attempt to push prices higher.
The price formed a new peak, but it was unable to sustain the breakout above the resistance level (~$3,055–$3,060).
A sharp sell-off followed, reinforcing that sellers are dominant at higher levels.
📍 Right Shoulder Formation
The price attempted another rally but failed to break the left shoulder’s high, creating the right shoulder.
This failure confirmed a gradual loss of bullish strength.
After forming the right shoulder, the price began to drop toward the neckline support.
📍 Breakout Confirmation & Bearish Price Action
The price has now broken the neckline (~$3,030), indicating an early-stage breakdown of the H&S pattern.
If the breakdown holds, further downside movement toward $2,995 is likely.
A retest of the neckline as new resistance would be an ideal entry point for short positions.
Trade Setup & Risk Management
📌 Potential Short Trade Setup:
Entry: After a confirmed break and retest of the $3,030 neckline.
Stop-Loss: Above the right shoulder (~$3,045–$3,050) to minimize risk.
Take-Profit: Around $2,995, aligning with the measured move.
📌 Risk Factors & Market Conditions:
If the price fails to hold below the neckline, it could indicate a false breakdown and a possible bullish reversal.
Macroeconomic data (such as interest rates, inflation, and geopolitical tensions) may impact gold prices.
Traders should watch for volume confirmation – increased selling pressure strengthens the validity of the breakdown.
Final Thoughts & Market Outlook
📉 The Head and Shoulders pattern signals that gold is losing bullish momentum, with a potential drop toward $2,995.
🔍 A break and retest of the neckline as resistance would confirm further downside movement.
⚠️ However, a failed breakdown could lead to a recovery, so traders should wait for confirmation before entering trades.
💬 What do you think about this setup? Are you going short on gold? Drop your thoughts in the comments below! ⬇️
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.