Gold at 4,128 — does the downtrend extend to 4,103 or reclaim 4,184? | Oct 7

Hi, I'm Daniel, an active prop trader. Today my bias on gold is bearish. Since last time, once the breakout pullback at the key level we were watching completed, price rose about 408 pips, just as our scenario expected, setting a higher high above the recent peak.

Right now, we've had a downtrend since the Tokyo session, and until that structure breaks, I want to prioritize rally selling, shorting the bounces. In this analysis, I focused on whether this downtrend will continue, or whether it shifts into a trading range from the London session and reverses. So let's get right into it, starting with a detailed look at the daily chart.

Gold's daily candle from yesterday has closed and confirmed as a bullish doji. As for the daily chart scenario I shared with you earlier, since the previous daily candle had formed a doji, my basic expectation was that gold would likely form a trading range throughout the whole day. Also, because it was a doji, the breakout direction was likely to clearly set the trend for the day, but basically, when it came to price breaking out of this range, I explained that the plan was to wait for a breakout pullback before entering, and then follow the price movement once it's outside the range.

This one tells the same story. The previous day's daily candle closed as a bullish doji, so for any move in the breakout direction, our strategy of waiting for a breakout pullback before entering doesn't change at all.

That said, in terms of direction, yesterday's candle is an outside bar that fully engulfs the candle before it, and if today's daily candle forms an inside bar and volatility contracts, then that sets up what's called an IOI pattern, where traders will tend to treat the breakout direction as a fresh new directional move for gold, so The game plan around the outside bar and doji stays the same, but since a breakout gives us real direction, how strongly we hold this scenario for the next move will shift accordingly.

Next, let's move on and take a look at the 1H chart for gold. The red vertical line on this 1H chart marks where the 1H candle was at the time of yesterday's stream for Trading Lab members only. Let's look at what scenarios and technical analysis I shared with members at that point, Here on YouTube, I'll narrow it down to the key points and continue the breakdown from there.

So, first, what I'd mentioned before was that, basically, after this bullish reversal candle printed right here, an upswing has been steadily forming on the chart.

Since price was still clearly inside that upswing, I answered that my bias was bullish, but the problem is, first, this bullish reversal candle here is, to me personally, still too vague to use as an entry point for a trade, and then the Tokyo session high was about here, I think, but the breakout above it was too small in size to really count as a true upside breakout, so basically we'd first wait for a pullback to this doji, the starting point, before considering a long entry, and I was saying we shouldn't just jump in and chase the move.

This is the main scenario I'm focusing on right now. On the other hand, there's also the opposite case, where price breaks out to the downside instead. For example, if price drops back inside the doji candle, that becomes the bearish scenario, In our Trading Lab community, we also break down in detail, step by step, the price action that leads up to decisions like these.

First, the one I was watching closely is this candle here, which I hadn't finished explaining yet during our last live stream.

As for this bearish reversal candle here, it only appeared after a strong downward swing, But this second bearish reversal candle was a spot where a sell setup was very likely to be noticed, I think, After that, a doji candle formed, then price broke out to the downside with follow-through, and a bullish reversal candle appeared, but and then right away the very next candle completely negated that bullish reversal candle, but the bulls also pushed fairly hard, and bearish momentum had been strong up to that point, and after that, price starts forming a small trading range on the chart.

There are too many markers, so I'll clear them for now, but this was a market where we had to trade around this range. At one point, price printed a big bullish candle and tried to break out above the range, but it ultimately turned into a failed breakout, as this bearish candle came in and rejected that upside breakout attempt, and then downside follow-through developed right into this doji candle here. Again it followed through lower, but formed a doji with a long lower wick, so I expected a sideways trading range to form after this.

And here's how I think about sideways trading ranges: candles that look like signals inside a sideways trading range basically tend not to work very reliably, so Now, this one here technically did form as a bullish reversal candle, but because it took shape right inside the trading range, I honestly didn't see it as a valid opportunity to set up an entry or open a new position there. That said, the bullish momentum was also really strong, so even if price drops from here, I'd still prioritize pullback buying.

So where's the key level? This doji candle tends to be watched as a key level, and I explained that we'd look to ride the move as price comes back to test this level again. And right as I was explaining all this, sure enough, a pullback candle formed on the chart, From there, a bullish upswing formed, and price went on to rally a full 408 pips in total from that pullback low.

Overall, this played out largely according to our scenario, but notice this high lines up exactly with the previous day's high. In today's Trading Lab members-only stream, I break down the upcoming scenario using these three key points. First, the Tokyo session turned into a downtrend.

It was what we call a classic downtrend day, so My bias is bearish; the downtrend structure is intact. Until this downtrend structure actually breaks, I'll keep treating further downside as my core scenario. That said, I also think it's entirely possible the London session shifts into a sideways trading range instead.

For example, if the Tokyo session shows a strong trend, the London session will often form a trading range afterward, so that's why I'm making this kind of judgment here. So what move do we wait for before a trading range forms? I've explained those finer price moves in full detail inside our Trading Lab community. That wraps up today's gold analysis.