Gold at 4,385 range low — breakdown to 4,366 or flip back to 4,436? | XAUUSD Aug 18

Hey, this is Daniel, an active prop trader. Short-term I'm leaning bearish on gold today. Just as our scenario called for, price broke out above the sideways range, and from there it kept pushing higher.

We saw a rally of roughly 496 pips here, and tracking the move after that, price carved out the rising wedge I flagged in the scenario earlier. From the Tokyo session open, we also saw price drop 461 pips, and right now it's forming an outside bar right here at this level, which is worth watching. Using this as the reference, we've got a sideways range forming, and based on the recent price action a downside breakout looks like the more likely scenario here.

Today's focus is whether price breaks below this sideways range and keeps falling, or whether that breakout fails and the bias flips back to the upside instead. So let's get right into it, starting with the daily chart first. On the daily, yesterday's candle closed as a bullish candle, confirmed green.

For the daily scenario I laid out yesterday, I walked you through these three key points. Friday's daily candle closed as a bullish doji, so the bearish candle I was worried about ended up acting exactly like a doji, and that scenario I'd been flagging actually played out just as I feared it might. Since the low reversed after a fairly deep drop and printed a bullish candle, I figured these two candles would act as our reference candles, and there was a strong chance the daily would build a sideways trading range going forward from here.

Right now we're sitting just after a test of the lower boundary, so I explained that price is likely to either test the high of this bearish candle or push through for an upside breakout. So how did the daily candle close? Exactly as I mentioned earlier, it finished as a bullish candle.

This price action played out just as the scenario suggested, testing the high up here. And since we've already seen a push to test the upper boundary, the move from here should be interesting to watch. This sideways range could well keep going, with price dipping to test the low down here, or alternatively, we could just as easily see a clean breakout to the upside from here.

If we get a clean upside breakout here, I'd expect the width of this sideways range to project as a measured move, most likely driving the next bullish swing higher. Now that we've laid out the full picture on the daily chart, let's shift our focus down to the 1H timeframe next. Yesterday's community-only broadcast went out in Japan time roughly an hour before the London session opened, right around the point where this bullish candle had just confirmed on the chart.

Right there on YouTube, let me walk you through a few of the key points I was actually breaking down for the community at that moment. So the setup was this: we had a sideways range building off this bullish doji as the anchor candle, and right at the moment I was streaming, the current bullish candle was actually testing an upside breakout of that range. So on the short-term view, factoring in the chance this breakout succeeds, I was leaning bullish here as the base case.

But my plan was to wait for this breakout to actually confirm, and only then look to enter long as the upside momentum keeps building from there. That said, even if the uptrend keeps running from here, you still need to watch the price action really closely. The reason is, if you track what happens next and the range of each new high starts narrowing, you're likely forming a three-push-up or a wedge pattern, and after that you really need to stay alert for the risk of a sharp move lower from those levels.

At the London session rejection or the New York session open, I explained you should also consider switching over to a downside bias from there. Also, if this sideways range fails to break out to the upside, then given the strength of that bullish candle right before it, you'd basically want to expect price to fall back inside the doji-based sideways range here. So rather than a fresh downswing forming from here, this was really a spot where you could expect price to slide right back into that range.

And within our community, I've walked through the price action step by step, highlighting a few key points that led up to the call on this sideways range breakout. First off, the main focus coming out of last weekend was clearly this move where price broke out above the descending trendline to the upside. After that, a reversal gets tested once, but this is really just a corrective price-action pattern inside that single swing, and that bearish leg ended up acting as fuel, feeding straight into the continuation of the upside swing that followed.

Through all of that, the current recent upside swing has now taken shape. This upside swing clearly lost its momentum right after this bullish doji formed, and notice how that doji sits inside the prior candle's wick, with its body kept tightly capped as well. After that reversal candle, price tried to push higher but rolled over, printing its first real downside swing.

Given that backdrop, I was explaining that at first we could reasonably judge a sideways range was forming, with price consolidating between those swings. And since price was recently attempting to break out of that sideways range to the upside, I was pointing out that this keeps our overall bias tilted bullish. So after the broadcast, here's how gold actually moved: heading into the New York session open, it formed a clean bullish setup breaking out of this sideways range, and from there the upswing kept extending higher.

First off, this section played out exactly per our scenario, so let's measure the move: counting from here, price rallied a full $49, that's 496 pips higher. And in what followed, my real concern was that each higher high was making a smaller and smaller advance. It clearly looks like a three-push-up pattern, and at today's Tokyo session open, the wedge shape has fully completed, right where I'd want to see it.

On this final push-up, we saw a clear reversal high form, which gave us a solid sell signal right there. And just as the scenario called for, price then dropped about a $46 range from that top, roughly 461 pips lower, exactly as I'd mapped it out. From the breakout of this sideways range through the moves after, the scenario played out exactly.

Today, focusing on that sideways range I just mentioned, I broke down both the bullish and bearish scenarios across these three key points, exclusively for our community. First point: right now we've got a sideways range forming, so watch closely for a breakout move in either direction. Second point: recent downside momentum and a failed breakout attempt.

From this structure, a downside breakout currently holds a slight edge here. If that downside breakout fails, I explained we should flip to a bullish bias, at least heading into the New York session, and start looking to buy. Let's look at the 1H chart again closely.

We're still stuck in this sideways range, and if you only judge single price-action patterns in isolation, the follow-through often fails the pattern and your stop losses pile up. On the 1H, the current focus is this sideways range built off the outside bar, and which way it finally breaks out. That's the key level I'll be watching as today's gold market plays out. That wraps up today's gold breakdown.