Gold rising wedge at 3,982 — pullback long or drop to 3,959? | XAUUSD Jul 20

This is Daniel, an active prop trader. Gold looks bearish short-term today. That said, we're forming a rising wedge right now, so if a proper pullback develops here, I'm ready to flip to a bullish bias.

The clean breakout of that sideways range I flagged for the community earlier hasn't actually happened yet. So right now, it isn't making a big move in either direction. Whether it climbs back into the uptrend or rolls over into another decline, today I walked you through the key levels to watch and exactly how I'd play this setup.

Alright, let's dive right into the daily chart in detail. Last Friday, gold closed out the daily candle as a bullish one. The prior candle broke below that bullish doji, closing out with a clear downside break.

And since it formed as a big bearish candle, a downside follow-through looked very likely to confirm here. We did end up making a lower low, but last Friday's daily candle actually erased about 50% of that bearish candle's drop, which was a notable recovery move. And right now, today's daily candle is basically forming an inside bar against the prior candle, So the base scenario, just as before, is that we most likely keep seeing this same sideways range structure gradually stepping lower, with each range shifting down over time.

Either way, on the daily chart we just don't have a clear directional bias yet, so it's really not a situation where you can confidently commit to a trade in either direction. So now let's shift down and take a look at the 1H chart. On the 1H, our community-only stream last Friday landed right around where this key line here was forming.

So now here on YouTube, I want to walk you through that same analysis, narrowing it down to a few of the key points. The first thing I want to highlight is this huge bearish doji candle. As one scenario, we don't really have a clear directional bias right now.

The recent down swing was strong, of course, but we've formed this big bearish doji candle here. So my point was that we wait for a breakout from this sideways range, and only then lock in a fresh directional bias. I also walk you through the full process that led me to make this particular call.

First off, on the recent candles, the key thing I want you to notice here is this big bearish candle. This candle showed very strong bearish momentum and a sharp, sudden drop. This candle broke below the outside bar formed by that recent doji bullish candle, so with this big bearish candle triggering the breakout, our overall bias clearly shifted to the downside.

On the other hand, since the drop was quite steep, there was a very high chance we'd see a pullback first and then another downswing forming right after that. Also, this final candle of the down swing on the 1H is a bearish doji, so we've got a candle that makes it hard for price to just keep dropping straight in one direction from here. Looking at the bounce afterward, you can see I've marked a doji here along with an FBO, short for false breakout, and right at this spot we get a clean sell setup forming.

Since it's a downside breakout of the doji, that alone is enough to justify going short, but as the theory says, after a pullback move against this sideways range, the market forms another downswing. Next, right after this, I laid out the scenario where the sideways range keeps going, forming an inside bar against that bearish doji candle, but there's actually one more piece of evidence that led me to that same conclusion. That's the second leg down against this level here.

When you look inside this bearish swing, you can clearly see that the downside momentum is fading step by step, weakening gradually. Look at the body size of that first bearish candle, then the second, third, and fourth — each body is shrinking progressively. And the candles are almost fully overlapping one another, which tells you this bear leg is clearly losing momentum compared to that first downswing.

Now on the other side, after that doji bearish candle capped off the down swing, look at the bounce that followed — two candles up, but the follow-through to the upside failed completely, and any sell setup got knocked right back down. Then price found support again here and tried to push higher, but it stalled near 60% with a long upper wick and gave it all back. Bottom line, neither bulls nor bears had a decisive edge, so the price action here was completely inconclusive for either side.

So this sideways range was likely to keep dragging on for a while. So after the downside breakout failed, price had a strong chance of running up to test the upper boundary, and even this single candle here formed a clean reversal, which does give us a valid buy setup. But the entry candle itself had an extremely long wick, so on the 1H chart alone I couldn't actually justify pulling the trigger.

Early on today price did move exactly as my scenario expected. I deliberately avoided calling it a spot-on prediction. Sure, you could say price broke out and pushed higher, but from a real trading standpoint the 1H chart alone didn't let me act, so I phrased it that way.

In today's community-only breakdown, I'm walking you through the analysis built around three key points. First off, as I mentioned earlier, on the 1H chart we're forming a rising wedge, and if price drops as the rising wedge theory suggests, I'm then expecting a pullback to set up. The reason is that this setup here was extremely strong, and since it's Friday, I reckon plenty of players missed their chance to get positioned into it.

My primary scenario is a pullback forming right after this. If we then see a pullback form and price snap back into the uptrend, that's exactly where I'd look to go long. Today I walked our community members through exactly how to play that. And that wraps up today's gold update.