Gold Prices Near Critical Turning Point Amid Heightened Market 1. Elliott Wave Structure
The chart primarily reflects an Elliott Wave sequence, with different levels of impulse and corrective waves clearly marked.
Wave (5) appears to be at a high, with subsequent wave labeling suggesting a corrective phase.
Wave 1 Invalidation level is shown at 2,715.95: The chart notes that for the current wave count to remain valid, price should not drop below this level, as it would invalidate the count by entering the range of Wave 1.
Wave 3 must close above previous levels and not re-enter the invalidation zone until a complete 5-wave structure is achieved.
2. Fibonacci Extensions and Retracement Levels
Fibonacci Extensions:
1.618 (2,775.53) and 2.618 (2,812.46) are marked as significant extensions, with the former acting as a potential conformation level for the 1-5 Elliott structure.
1.236 (2,772.47) is labeled as a potential point for volume divergence by Wave 5, which suggests that if price reaches this level with decreased volume, there may be a weakening momentum, potentially indicating a trend reversal.
Fibonacci Retracements:
0.618 (2,668.76) and 0.786 (2,657.48) are labeled as retracement levels from the previous low, offering key support areas.
These levels coincide with a "Long 2 Short 4" structure, indicating potential zones where price could find support during pullbacks.
3. Wyckoff Phases and Distribution Patterns
The chart employs Wyckoff Methodology, marking phases like Phase B and SOW (Sign of Weakness).
AR (Automatic Reaction) and ST (Secondary Test): These are shown as part of the distribution phase, suggesting that the price is undergoing a redistribution before a potential move.
BOS Internal (Break of Structure) indicates an internal structural shift, suggesting possible trend shifts within the larger framework.
UT (Upthrust) in Phase B: This Wyckoff upthrust phase indicates a test for supply, where price briefly moves higher before facing strong selling pressure.
4. Volume Divergence and Conformation Zones
Volume Divergence by Wave 5 (1.236 at 2,772.47): This extension level is a key point for observing potential divergence in volume. Reduced volume at this level might suggest a bearish divergence.
Inducement Zone (1.786 at 2,786.92): Inducement levels act as potential reversal zones, often where buyers may get trapped before a trend reversal.
Conformation Zone at 1.618 (2,775.53): This acts as an additional validation level in case price breaks through prior levels, offering a point to gauge the strength of the bullish trend.
5. Support and Resistance Levels
Resistance Levels:
2,790.08: This is a major resistance level, indicated as the BC point in Wyckoff, suggesting a potential high point in distribution.
2,801.20: Another critical resistance level, marking the extension above Wave (5) = 1 and indicating where price may face significant selling pressure if reached.
Support Levels:
2,746.89 (0.382 Retracement) and 2,715.95 (0.618 Retracement): These levels serve as critical supports for Wave 3 and are essential for maintaining the integrity of the current wave count.
2,685.41: This lower support zone represents a deeper retracement, where price may potentially consolidate if it moves further down.
6. Trendline and Channel Analysis
Downward Trendlines: The chart shows several descending trendlines, suggesting a broader bearish channel or downtrend from the high near 2,790.08.
Resistance Line BC Distribution (8H): This acts as an overhead resistance level, particularly in shorter timeframes, indicating selling pressure at this level.
Support Line AR Distribution (8H): This line provides support during the corrective phases, helping to guide the price back up within the trend structure.
7. Trading Strategy Considerations
Bullish Outlook: A bullish view is conditional on holding above 2,715.95, with targets at 2,775.53 and possibly extending to 2,812.46. These levels may provide resistance and serve as exit points.
Bearish Reversal Indicators:
A break below 2,715.95 invalidates the bullish wave count, suggesting a deeper corrective phase.
Volume divergence at higher Fibonacci extensions (2,772.47 and 2,786.92) may signal exhaustion, potentially prompting a reversal or correction.
Wyckoff Strategy: If price forms a UTAD (Upthrust After Distribution) at higher levels, this may be followed by a strong sell-off, signaling an exit for long positions and an entry for shorts.
8. Risk Management and Key Levels
Invalidation Point for Bullish Scenario: The bullish wave count is invalidated if price breaches 2,715.95 and holds below it, signaling the end of the expected uptrend.
Stop-Loss Considerations: Traders can consider stop-loss placements below key support levels (like 2,715.95) to mitigate risk in case of a downtrend continuation.
Volume and Break of Structure (BOS): Monitoring BOS zones and volume at critical levels helps validate or invalidate trend direction, offering a guide for entry or exit points.
Summary of Key Takeaways
Resistance and Target Levels: 2,775.53 (1.618 extension), 2,786.92 (inducement level), and 2,812.46 (diagonal wave 5).
Support Levels: 2,746.89 (0.382 retracement) and 2,715.95 (Wave 1 invalidation) are pivotal supports for the bullish structure.
Wyckoff Phases: Phase B (distribution) and BOS signals suggest distribution characteristics, pointing to a potential trend change.
Invalidation: A break below 2,715.95 would invalidate the current wave count, indicating a more extended corrective structure or trend reversal.