GEOMETRY OF GOLD: 10.01.2021

As I discussed in my previous two posts about gold, should the price break through the upper boundary of the flag channel and stay above, I would expect a nice ride to 2400 or even higher in the following months. The last week action seemed to confirm that the market has objected the move further up. Rather strongly.
Let me explain the hypothesis from the candles perspective.

While the December’s candle looked like a Bearish Engulfing, it was not well supported by technical indicators and it did not fully engulf the upper wick of the November’s. The price is clearly back to the flag’s channel and the monthly PSAR remains bearish. I view the conditions as neutral and am waiting for the monthly print to help determine the direction.

The first week of the year completed with a very strong Bearish Engulfing candle that engulfed the candles of the previous four! weeks. To add an insult to an injury, the weekly 8/20 EMA flipped to the dark side and the price, after a failed attempt to break through the upper boundary, is back in the channel and is below the 20 EMA. With such strong bearish pressure, the next target could be the level of 100 MA or approximately 1680-1640.

I view the daily candles to have a strong bearish pressure as well. On January 4-7, candles produced a Tower Top that was also a Bearish Engulfing followed by strong confirmation at the end of week. The price fell below the 200 MA line and 8 and 20 EMA crossed bearishly. There is technically no support from MA perspective for a continued fall.
It would be important to watch how the price reacts at possible recovery attempts in the areas of 200 and 50 MA. If rejected, I would be expecting a downtrend that might find support at the weekly 50 or 100 MA (~1810 or ~1640 respectively).

Waves and Targets:
As I identified on December 17, 2020, there is a chance that the stock is working on a zigzag formation. Wave (B) in red has retraced exactly 0.618 of wave (A) and the wave (C) seems to be in progress. If it is indeed a zigzag, I would be expecting the wave (C) to extend to 0.786-1.0 of the length of wave (A). That would be 1710-1640 and it would perfectly align with the targets I mentioned in the paragraphs above.

If the stock takes a direct path down, I would expect wave (C) to complete within weeks. However, if the stock choses to move down in a zigzag fashion, there is a possibility that the decline takes several months, similarly to the path of wave (A).

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