When analysing the GOLD price today, I decided to use two rather different methods of technical analysis. The first one is based on candlestick patterns and MACD indicator, i.e. my favourite PA+MACD. The second one is the recently very trendy Overbalance method popularized by the recent extraordinary results of a participant of a trading contest (Filip B. aka Vezori), who managed to make 7000% profit in two weeks.
The first image shows the daily chart with the highlighted bullish outsidebar candlestick pattern. The pattern occurred at an important support and resistance level (S/R). A similar pattern occurred in September 2020, the breakout of the price from its range triggered demand and a price increase of USD 120/oz.
Currently, the price is inside the formation, if there is an upward breakout and the MACD goes into an bullish phase, it could be a strong upward signal.
The overbalance strategy is based on measuring corrections and assuming that as long as the biggest one is not overcome – the trend continues. But this is only one way to use this technique.
You can measure previous corrections to determine when a correction is likely to end and join the trend or open an order when a correction has started by placing a TP at the edge of the OB.
The attached chart shows two upward corrections in a downtrend (around $70 each), the third green rectangle, its upper edge, indicates where the price could go if the next correction respects the previous range. The fact that a correction is very likely indicates the first chart and the bullish engulfing, and its range is determined by the overbalance strategy – 1830 USD/oz.
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