Gold bearish off the wedge — sell the rally to 4,096 or breakdown to 3,960? | XAUUSD Jul 8

Hey, I'm Daniel, an active prop trader. Gold's bias right now is to the downside, and price has already worked its way down to the level laid out by the wedge pattern. Yesterday, after the stream, price reversed and built a clean buy setup, and from there it rallied a solid 607 pips straight up before running out of steam.

After that, price carved out a clear reversal pattern at the highs, which then rolled straight into the current downtrend, so right now we're leaning bearish here. So as always, let's dive into the detailed breakdown from the daily chart. Gold's daily candle from yesterday closed bearish, and since price has now broken out below the doji from that recent bearish candle, theory tells us conditions favor further downside movement here.

Looking at the daily candle on its own, that recent swing high can be read as a pullback against the doji line, so even purely at the daily level it's completely natural to lean bearish and keep a downside bias here for now. On the flip side, if the daily candle happens to reverse from here, it would leave a long lower wick, but rather than that turning straight into a clean upside swing, the more likely path is a pullback back toward that recent bearish doji line, so for now the smart move is to wait for this breakout first and only then reassess which direction to commit to.

Now let's shift down and take a look at the 1H timeframe. Yesterday's session for our community members happened right here, around this red line, where a small range was forming. After this, I'll walk you through a few of the key points here on YouTube from what I explained yesterday to our community members.

So the first key point I want to cover is our overall market bias. We're in the second downswing off the high, so short-term the bias is clearly down, and that's exactly what I used as the baseline for setting our overall direction here. From this high we saw the first big downswing, then an upswing, then another downswing, and at the time I recorded this we were still mid-move, so what I was explaining is that we're right in the middle of that second downswing continuing to play out.

So after we've seen that classic two-leg move play out, my base assumption is always the same: the move that follows tends to develop into another two-leg move as well, and that's exactly how I position and plan my trades around it. And the reason is simple: the number of key levels that form along the way stays the same too. So if there's a key level right here, then structurally it's completely natural for that move to break down into two swings in the trend direction and one corrective swing in between.

That's the logic I was working with. On the other hand, once that second downward swing had wrapped up, I'd already prepared a scenario where I'd flip my bias over to the long side. That's essentially what I was setting up for at that point.

The third point covers candles 3 through 6, where I confirmed a three-push-down pattern forming and started staying alert for a possible reversal setting up. As for this pullback phase right here, I'd say there was clearly enough of a trigger in place for it to actually happen. Looking at each recent low, you can see the downward steps are getting smaller, which basically sets up a wedge-like effect, so there was real potential for price to climb up toward the highs of this reversal zone.

Right from this doji, price broke out to the upside, and with a fairly deep pullback along the way, it pushed higher and then stopped exactly at the start of this wedge, just like theory says it should. After that, price formed a bullish doji, drifted into a sideways range, and once it broke out to the downside, another fresh downswing started to take shape here. So here we had one big downswing, a single corrective pullback, and then the downswing continuing again, which really gave us a clear reference point for how to read direction from that point forward.

Following the price action after that, we see long lower wicks that still fail to reverse, and even where the bulls had stops placed above the recent high, none of those levels got triggered as price kept grinding lower through them. So there is some buying support stepping in, but it's clearly not enough pressure for the bulls to force a reversal, and that's exactly what this price action tells us here. And finally, once we broke out below that bearish doji candle, price built another sideways range and then continued higher off the prior move, so let's now walk through exactly how the market actually played out from there step by step.

Just as we expected, once that downswing wrapped up, the structure wasn't the cleanest thing to look at, but price then carved out two upswings in a row, and right on cue it pushed higher by about a 60-dollar range, which works out to roughly 607 pips of upside move. On the flip side, as I just mentioned, it never formed a clean upswing. Instead it built a reversal pattern, then rolled straight over into a downtrend, and the bullish traders who jumped in on that upswing got caught out.

This was almost certainly the moment where stop losses got triggered — that sharp, instant drop, and you can clearly confirm that same reaction right here on the chart too. So for today's community-only breakdown, as I said at the start, we're bearish right now. With the wedge complete and the drop underway, sellers clearly in control and the bears holding the momentum, the plan here is basically to stay patient and wait for a rally to sell into.

So in this session I'll walk you through the concrete strategy from here, along with the full analysis behind that plan. Right now, after this wedge formed, price has dropped sharply, even overshooting the wedge's origin point. Sure, any candle here could turn out to be the climax candle, but looking at the downswing that started from this point and how the move has carried on, I think it's still a bit too early to call this a climax, so if you want to go long, wait for a clear trend reversal before you enter.

If sellers stay in control, I'd rather wait for a rally high to form first, then start looking for short entries. That's my full gold breakdown today.