Gold at 4,165 doji high — bounce to 4,202 or drop back to 4,128? | XAUUSD Jul 7

Hi everyone, Daniel here, active prop trader. On gold, my short-term bias right now is to the downside. But given how price has developed up to this point, from here I also want to actively hunt for long setups and buying opportunities.

Yesterday played out right in line with my bias, with the downtrend continuing. This red line marks where I published, and from there price built another rally high, then dropped roughly 380 pips off that level. So with that in mind, let's dig into the daily chart in detail.

Alright, on the gold daily chart, yesterday closed as a bearish doji candle, right at that indecision level. From the start, the prior bullish candle had already reached the measured move projected off the breakout from this bearish doji, so as I mentioned in yesterday's video, we were likely heading into a short-term corrective phase from here. Since yesterday's candle was neither a reversal candle nor a trend candle, but a bearish doji, it makes this corrective phase interpretation much easier to justify.

Also, since the bearish candle closed on its real body, when you look at the whole flow of the day from start to finish, it tells us the overall direction was clearly to the downside. On the other hand, that long lower wick tells us the downside support is strong. And when you focus on the price action from the highs up to this point, you can see that, relative to every one of the surrounding candles, this bearish wave is actually getting weaker.

As for when this correction phase finally wraps up, just like I mentioned yesterday, I think the high of that doji candle formed along the way is a level traders are likely to keep watching closely. Right now price is testing around the high of this bullish candle here, so honestly it wouldn't surprise me at all if we see the rebound keep pushing higher from here. Also keep in mind, yesterday's daily candle closed as a doji with a bearish body, so if the bulls can't fully seize control and we slip into a sideways range instead, then yesterday's daily candle is very likely to act as the upper boundary of that range going forward.

Alright, that wraps up the daily chart, so let's move to the 1H. Around this red-line 1H bullish candle with the long upper wick, yesterday I ran a community-only session. Today on YouTube I'd like to walk you through just the key points from what I covered in that session.

So my first read here was bearish, based on the price action we saw during the Tokyo session, but I was also keeping in mind a scenario where it swings back into that opposing uptrend. That's because last week we had a really strong uptrend with powerful bullish momentum running, but as the new week opened, price carved out a double top right here, reversed, and flipped into a downtrend. Given that setup, I was expecting a corrective pullback here, and once that correction wraps up, price tends to push back higher with strong bullish momentum again, so from that angle I was also watching closely for a possible return to the uptrend.

The short-term bearish view was also really easy to read here, and since I posted this right before the London session, when you look back, the Tokyo session price action was a textbook down-trend day, so in terms of bias, I'd say we were clearly in a bearish setup at that point. The next thing I was watching was the price action leading into the reversal here, and I also walked through exactly how that whole process played out in detail. The first thing I was watching was this bullish reversal candle right here.

Now, even though we'd had a really strong uptrend running into this point, and even with such a clear, textbook bullish price action forming, price still failed to break to a new high. Given how weak this last upward swing had become, there was a real chance of a reversal setting up right here. And that's exactly what happened.

Price failed to complete this bull flag pattern, and then it broke straight down through the most recent uptrend line. From here a sideways range starts to form, and as you can clearly see, price came up and tested this same high twice, taking two separate runs at that exact level. Those two attempts at the high effectively formed a double top, and that pattern triggered the reversal that pushed price down into the current downtrend we're now in.

So this reversal kept playing out just like we mapped it, and if you look at how price actually moved from there, exactly as I called on the bearish side, it dropped from that rally high, from this rally high right here all the way down to the most recent low, and yesterday it followed the scenario perfectly, giving us a clean 38-dollar move. In pip terms that worked out to a solid 380-pip drop from the top. Something else I flagged inside the community was whether we'd get two downward swings, and right now that's exactly what we've got — two down swings, a classic two-leg correction — so from here the market basically leans toward reversing.

Naturally, since we already put in one rally high along the way, price could bounce right back up like this. So we're likely to see two upward swings form here, and even though the downtrend is still technically in play, I want to actively take longs, because that lets us bank the profit from both of those upward swings. That's the approach I'm laying out for you in today's analysis.

Inside the community I go deeper into exactly how this second downswing wraps up from here, how to pinpoint the bounce, and precisely where to flip the bias over to the long side, so make sure you check that out. That wraps up today's gold update.