Gold And Silver: The Bulls Failed

Gold - Classic Chart

Another profitable week for the bulls ended and so did the upward momentum. Price elevated for a decent $40 from my last post and almost touched the $1223 resistance area on Thursday, but failed below $1220 and then quickly retraced down for $15 to a $1204 close.

The rule of the game is set so that if you don’t keep buying to push the market up, sellers will appear and you would be buying all the way down. Once weakness appeared, the bears took the ball and started their own game, pulling the price down from recent highs. Monday brought more selling pressure to the game and the price is now below the first support level at $1190 (former resistance, highlighted in green). If we close below $1190, then I would not rule out price reaching $1170/$1131 supports. Sellers can benefit from the trade lower, with a stop set just above $1200 and take profit put above $1131. $20 of risk versus $55 of profit, a sound ratio.

Gold – Elliott Wave Chart

As I assumed in my last post, Gold has finished shaping wave “a” right within the set targets between $1195 and $1223, at $1219.82 high. Then the price retraced and, I think, now is the time for wave “b” to show up. Wave “b” can retrace to levels between 38% and 138% of the wave “a”, but usually stops around the 61.8% level. All of it is put in the above daily chart and price is already below the 38.2% Fibonacci level. The next levels are $1172 (61.8%), $1142 (100%) and 1113 (138%).

Overall, we are still in an a-b-c correction phase and wave “b” is not impulsive. So the sale should be short and cautious, with a tight stop above $1200 and you should watch the market closely and move your stop lower with the falling price. Take profit either by trailing stop or take profit to escape from losses.

Wave “c” is ahead in the opposite direction...it can be scary, fast, destroying, so be prepared. Fingers crossed!

Silver

Silver lives the same story as Gold does these days. Bullish action is over after two successful weeks. The metal failed at a $17.39 high, just below resistance located at the $17.43 level (previous high as of February 13th). And the Gold selloff repeated with Silver as price closed ₵33 deeper below the peak.

Those who implemented the idea to buy above $16.87 could have scored a nice ₵50 per troy ounce of Silver last week.

This time, the risk/reward ratio speaks for itself. Sellers are favored with a target around the local low at $15.27, with $1.5 of potential profit versus the risk set above $17.43 in the amount of $0.7 of potential loss. Move your stop with the falling price and enjoy falling risk at the same time.

I will update you next week with developing price action.

Lucky and Intelligent Trades!

Aibek Burabayev
INO.com Contributor, Metals

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.