Yet again sound technical analysis has prevailed against turbulent times when it’s difficult to see the path forward. We have outlined our Gold trading playbook several times here ( please click on the link to check it out ) and it is very simple basic technical analysis which you can do at home !
In last post we mentioned how we are short gold and looking for 1260 as final target. Also we were looking to get long at that level because 1260 – 1240 is good support to lean against. Gold reached 1260 yesterday and we got filled. Since it was position in profit, we decided to leave it during Brexit referendum. Because, 1) if UK votes to remain then there is little downside and we were already in profit so trade can be closed at breakeven. 2) If UK votes to leave then it is a big surprise and in that case safe havens rally and we can make much more than risked amount.
We always mention that It is the surprise that throws market out of kilter and that’s where the biggest trades are. Of course this post is not for taking victory lap on a great trade but to show traders how technical analysis works. It doesn’t mean that fundamental understanding has no place in trading. Knowing the fundamentals well can help create a bias but opinions and bias in trading can’t help you to get good entry and exit in a trade. If one says, “It looks like gold is going up and it is a buy”, but that doesn’t take you anywhere. Buy from where? right now? later? at what price? All those questions can be answered objectively using technical analysis to find good support and resistance. We didn’t know from which side majority of UK population is going to vote but we took a trade simply looking at support level and based on risk reward analysis.
So now what’s next? Well, again levels to trade against remains the same. Our first target has been hit at 1350 and we are looking for 1390/1400 in coming sessions. Also we would like to add to the position near 1300 / 1280. Things are still in a flux so reading the price action is the key. But to maintain the upward bias, Gold must hold 1280.
Follow us on Twitter @Bombay_Bulls for trade updates.