Gold at 4,318 breakout-pullback — resume lower to 4,266 or flip bullish? Sep 17

Hi everyone, Daniel here, active prop trader. My bias on gold today is to the downside. Since last time we caught 443 pips right in line with that view.

After that rally, right at the FOMC we printed a big bearish candle and price flipped and reversed sharply lower. Right now, at the level I flagged yesterday as a key point, we're seeing a breakout and pullback completing on the 1H chart, and price is now pushing up above this recent swing high. Unless we see a clear shift in structure, my base case is still favoring the downside here.

The key question is whether price resumes lower off this breakout and pullback, or breaks above the recent swing high and flips us to a bullish bias, so that's exactly what I've been watching. Alright, let's dive straight in and start by looking at the daily chart here. For gold's daily candle yesterday, it closed as a bearish doji.

The daily scenario I'd been walking you through was actually set up by the candle just before that one. Given the price action up to that point, this doji signaled that volatility had really compressed, and it was likely setting up right at the timing for a breakout. If price broke to the upside, I told you we'd likely see a move testing the high of this candle, which forms the top of the larger range on the bigger picture, and that was one scenario I was considering as the bullish case here.

On the flip side, there was the bearish scenario, where price could naturally break below the low and push down beneath that doji line here. When it does break lower, it typically turns out to be short-lived, and I explained that a market extending down with sustained momentum is really hard to see here. The reason is that up to this point we've seen a range form over and over again, and every single downside breakout of a doji candle has failed to hold, so taking all of that into account, I explained that pushing further to the downside is really difficult here.

With both a bullish and a bearish scenario on the table, yesterday's daily candle, as I mentioned earlier, closed as a bearish doji. So in the end, price didn't produce a real breakout in either direction here. Looking closely, yesterday's daily candle formed an outside bar that fully engulfs the prior two days of price action, so once again the daily chart has lost its clear directional bias.

The first scenario to consider is this: since we've got a doji here, if we use the four price points of this new candle as our reference, the market tends to drift into a sideways range. It tends to drift sideways, and any one of these four price points can act as a key level, so short-term I'd say we'll likely see a trading range develop here. Also, looking at this candle on its own, it's got a very long upper wick, and since it's making higher highs, I'd say there's a slightly higher chance of a break to the upside.

Either way, this oversized outside bar clearly signals a lack of directional conviction, so at this point, at the daily chart level, I personally judge that we simply can't justify opening any fresh positions here right now. Now let's drop the timeframe and take a look at the 1H chart. Yesterday, the community-only stream went out right here at the red line, where this small bearish candle formed.

Here on YouTube, I'll walk you through exactly what I was breaking down for the community members at that moment, and take it from there. The first key level to note is that price broke above the recent swing high here. Since price broke above this high with a strong bullish candle, the bias shifts to the upside, and that's exactly how I first explained the way we decide our directional bias here.

After that big bullish candle broke out through this key level and pushed the high up, the bears naturally became far more hesitant to press their short setups here. Given that backdrop, this bearish reversal candle basically served as one of the triggers for a time-based correction rather than a full trend reversal here. So the main bullish scenario I was working with was for price to eventually break out above this sideways range to the upside.

On the flip side, if price broke lower, the previous day's high sat right around here, so a breakout and pullback setup could form at that level. This too becomes a valid long entry once we confirm that support-resistance flip, which is exactly what I walked you through. On the bearish side, the scenario flips lower once we break below the previous day's high — meaning if price drops under that prior daily high, my bias shifts to the downside.

After that, once we get a pullback-style move back higher, that's where you can look to set up your short entries, as I explained. And inside our community, I walk you through the whole thought process behind how I reach a call like this. Looking closely at each of these, the first thing worth noticing is that price has been capped at the highs three separate times around the same level.

Each of these highs is stepping lower, but at the same time the lows aren't cleanly breaking down either. One thing worth noting here is that early on we had bears loading up shorts, and this looks like a spot where a lot of their stop losses are likely still sitting. Getting pressed down here again and again, so I read this level as acting like a solid order block.

After that, on the price action into the New York session, since the broadcast before last, this doji level has been giving us a failed breakout attempt here. We broke out to the downside, then retested this doji level and printed a strong bullish reversal candle. From this starting point, price built a strong bullish candle and pushed up through the recent high, breaking above it.

After that, a very strong bullish candle formed with heavy momentum, so even after seeing such an obvious reversal candle, the bears never came in to short it repeatedly either, which is exactly why I stayed bullish here. So what happened next with gold? Well, right in line with my bias, it started moving We saw a solid move higher here, a range of about 44 dollars, which works out to roughly 443 pips of upside.

But we had the FOMC coming up around 3 a.m. Japan time, and on that FOMC announcement gold formed a big bearish candle, dropping sharply and breaking the recent lows. It's carving out lower lows, so the trend has now clearly flipped over into a downtrend at this point.

In yesterday's scenario I mentioned this too — once price broke this key level, we could look to short on a pullback-style move back into it. That was yesterday's read. In reality, we're seeing a move that looks like a pullback, so a short entry is on the table here — but if price breaks above this high instead, if we clear the high made in the second hour of the London session open, that premise breaks down, so I'd want to flip my bias and switch to the long side.

So today, for our community members, I'll cover the bullish and bearish scenarios across these three key points as always. First point: we're testing a key nearby level, so the bias is bearish for now. Second point: whether the drop after the reversal continues is the short-term focus.

Third and final point: if price clearly breaks the recent high, we flip the bias bullish and start looking for longs. Also, after yesterday's FOMC announcement gold dropped sharply, but there's real structure to this whole move, and a few patterns from here that help us predict what comes next. I broke all of this down in detail inside our community today. That wraps up today's gold update.