GOLD👑 (XAUUSD) KEY LEVEL TO WATCH 👀AND WHYMany skills are required for trading successfully in the financial markets. They include the abilities to evaluate a company's fundamentals and to determine the direction of a market trend. But neither of these technical skills is as important as the trader's mindset.
The recognition of patterns and its body of knowledge of how to react and what to expect helps a trader's success.
Traders are always analysing Trends and Reversals. Their eternal question for traders is Can the trend continues?. Knowing trends and trend reversals are critical for any trader’s success.
Chart patterns classification of 'Continuous' or 'Reversal' patterns helps traders to identify specific patterns and expect their outcome from current price action.
Traders move prices between key support and resistance areas (a tug of war) as their perception shifts between optimism and pessimism. This movement of price adhering to key support and resistance areas create chart patterns.
Reversal patterns exhibit a total shift of trends from bullish to bearish or bearish to bullish in a single pattern structure.
Examples of the reversal patterns are 'Head and Shoulders, Double Tops and Bottoms.
A knowledge of reversal patterns helps traders to estimate the 'end of trends' to execute trades in a timely fashion for maximum gains.
This knowledge also helps traders to time the trades in the opposite direction and to place smaller stop levels.
Here I discuss one of the key reversal patterns
Chart Pattern and present examples of them.
GOLD has been trading an ABC Bullish Pattern from 1804.76, little I know about ABCS:
One of the best ways to confirm symmetry in the markets is to check price and time using two or more cluster confirmations. Another key method to compute these patterns is to use percentage change of price between market highs and market lows. Symmetry is a science by itself, and traders take great advantage of knowing the potential turning points and levels using these methods.
Symmetry is visible in all markets and in all time-frames. Symmetric rallies and declines give traders an advantage to determine the key turning points. A cluster of similar extensions and similar retracements at key price ranges, or some important levels provide insights into future significant resistance and support levels. In addition to knowing key turning points, the benefits of trading symmetric price and time cluster levels include low-risk trades.
The ABC Chart pattern and its related AB=CD Chart Pattern are prime examples of "Symmetry" in the markets. These "Harmonic" patterns help traders to identify buying and selling opportunities in all markets and in all time-frames. The ABC and AB=CD patterns are first described by H.M. Gartley in his book 'Profits in the Stock Market." (1935). The main advantages of trading harmonic patterns are that they allow traders to determine risk vs. reward ratios beforehand as they forecast key market turning points and profit targets for traders. The ABC pattern (can be a continuous or reversal pattern)
The key point in identifying an ABC and AB=CD patterns is to correctly detect the A, B, and C key inflection (Pivot) points in a chart while they are forming. These inflection points are determined from key swing highs and lows of various levels, and for its correction waves to determine distinct "swings." The potential C point is usually forecasted by the fib. retracements (0.38 to 0.618) of AB Swing. Once A, B, and C points (and AB, BC legs) are identified, a projection algorithm is applied to compute the Potential Completion Zone (PCZ). This PCZ area is where ABC pattern is expected to complete and may signal continuation of its trend in the first trend direction (AB). Following the completion of BC leg, the projections of AB and BC legs (using fib. ratios)
The swing legs (AB and BC) in ABC pattern are generally in symmetrical proportions both in price and time with consistent slopes. The tractable CD leg has a harmonic relation with symmetry for AB and BC swings. The ABC bullish structures are formed after a prolonged prior down trend or consolidation trends.
A Pattern Completion Zone (PCZ) is computed using AB swing and Fibonacci ratios (50-88.6% of AB). This PCZ area is where 'C' pivot is formed at the end of BC swing and to signal completion of ABC pattern.
Trade Entry:
After ABC pattern is completed, it is advisable to wait for the pattern to confirm a reversal signal using any momentum-based indicator or price confirmation mechanisms. I use various confirmation and trade entry methods, but one of the methods is price crossing 2-bar high after 'C' in ABC Bullish pattern or a 2-bar low after 'C' in ABC bearish pattern.
Stop:
A Stop is placed few ticks below C (in Bullish) or few ticks above C (in Bearish) levels.
Targets:
The ABC Pattern targets are computed using the AB and BC swings. The height pattern (AB) is used to project target levels from (-level using fib. ratios. The first target zone is (62-79% AB) from 'C' and second target zone is (127-162% AB). A secondary target level is set at 100% AB Level .
In resume price has reached the 100% AB: 2040.55.
Now what could we expect from price?
As mentioned above The ABC Chart pattern and its related AB=CD Chart Pattern are prime examples of "Symmetry" in the markets.
Gold on the daily chart the price resembles an AB=CD and the price is trading below the entry level 2012.36.
Stops: 2068.32
Targets:
38% AD: 1928.00
50% AD: 1890.61
62% AD: 1853.38
79% AD: 1800.41
Let me explain more about AB=CD patterns below
