Hello dear all,
It is a pleasure to be with you again and for todays post I picked the daily gold chart.
The pattern you see can be defined as a head and shoulders pattern.
The first black arrow to the left is the left shoulder, the red arrow in the middle is the head and on the right you see the right shoulder.
Please also note that we should take additional confirmation of the candles themselves.
The last three candles simbolise an evening star which is a bearish reversal candlestick pattern.
Price went below the trendline, come back up to test it again and now provided us with a reversal pattern.
You may also note that gold is positively correlated to the euro. Todays most euro crosses showed weakness for the euro which is now also confirmed by a bearish setup for gold.
In addition to trade this set up you may note that the right shoulder is nothing more or nothing less than a lower high.
When price stops to make higher highs then we should question in this case the bullish trend and look for a possible change of trend.
Then once whe have our bias we choose a smaller time frame to pin point our entry at the best possible price.
In this case this means taking an overbought stochastic cycle down.
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