Gold at 4,105 support — correction over or break 4,170? | XAUUSD Oct 8

Hi, I'm Daniel, an active prop trader. Today my short-term bias on gold is bearish. Since last time, price followed our scenario exactly: it broke out of the key level, completed the pullback, and then dropped about 731 pips into the New York session open, a move we've now confirmed.

Right now, my view is that the correction following yesterday's strong drop is very close to finishing. If price turns lower and resumes falling from here, this is a phase where I want to target a decline toward the previous day's low as my next downside objective. So the key question is whether price finishes this correction and returns to the downtrend, or breaks above the recent high, forcing me to switch to a bullish view.

That's what I focused on in this analysis. Let's dive right in and look closely at the daily chart. As for gold's daily chart yesterday, it closed with this bearish candle.

For the daily scenario, the basic premise I shared was that the previous candle was a doji, so a trading range was likely to form using that candle as the reference bar. And in terms of how to trade it, nothing had changed. For daily-level entries, we needed to wait for a breakout and a pullback before getting in, so I explained that this wasn't a situation where you should be thinking about trading on the daily chart.

And if there was one more thing worth highlighting from the day before, it's that we'd just formed an outside bar relative to the previous candle. So I explained that if volatility contracted from there and an inside bar formed, that would create what's called an IOI pattern, and in that case the market would tend to show stronger directional momentum toward the breakout than with a normal outside bar breakout. So against that backdrop, the daily candle did ultimately close bearish, but its body got pulled right back inside the previous doji candle, showing what's often called a magnet effect, where price gets drawn back toward it.

Because of that, no IOI pattern actually formed, and I think we can say the daily chart is simply continuing to trade within its range for now. Looking at it again, the daily range has now taken on a fairly solid shape, and we're at the stage where its width is becoming clear. So unless price breaks out of this daily range shown in the gray zone on the chart, I think it's fair to say we don't really need to think about daily-level trades just yet.

Against that backdrop, today is basically still a range day as well. As you can see, price is currently trying to form the body of a bullish candle on the daily chart, so a rebound is likely from here. However, that doesn't mean we're shifting into a daily uptrend, so for the time being, daily-level trades remain difficult to take.

Next, let's move on to the 1H chart. Yesterday I held a live session for our Trading Lab community members, and it took place right around when this bearish candle formed, at the point marked by the red line. Here on YouTube, I'll walk you through the key points of the technical analysis view and the scenarios I shared with members at that moment, focusing only on the most important parts.

Looking at the previous day, the Tokyo session price action first formed a very clear downtrend structure. From this point to this point is the Tokyo session, and price kept falling steadily in one direction with barely any bounce, the classic movement of what we call a downtrend day. So in terms of strategy, the approach was to prioritize shorts until this trend structure breaks down.

As for the most recent entry opportunity, price had clearly broken out of this doji candle, so I explained that waiting for that breakout and then a pullback before going short would be the perfect, high-quality entry opportunity here. After this, for the price action from the London session onward, I expected two possible patterns. Either the trend day would simply continue, or, since we'd just had such a strong trend move, the market would be prone to forming a trading range.

However, I also pointed out an important caveat. At the time of the stream, marked here by the red line, it was still far too early to anticipate that trading range and start trading ahead of it just because a range might form later. And on the way to reaching that conclusion, I also picked out the key candlesticks worth focusing on and walked through the sequence of price action.

First, looking at how things developed after the stream before last, an upswing started forming from this point, where an outside bar doubled as a bullish reversal bar. Around this outside bar that doubled as a bullish reversal bar, the London session was moving in a fairly trending way into the candle's open. But by my theory, this bullish reversal bar wasn't a chance to go long.

So what I said was, before entering, we should first wait for a breakout pullback against this doji, which was why I didn't treat that bullish reversal bar as a signal. Looking at this, after the doji formed here and the bullish reversal bar printed, the first downswing develops. Then the breakout pullback played out exactly as in my scenario, and price rallied again.

On this upswing the candles clearly overlap a lot, and we get a range breakout, a pattern that also resembles a final flag. By testing the same high a second time, it acts like a so-called double top, and the market reverses from there. After that, price broke out to the downside, follow-through candles kept coming, and from the Tokyo session open, the market then shifted into a clear downtrend.

So, as you can see, price formed a clear reversal pattern, a double top, and then dropped. On top of that, momentum was strong, and the structure was a downtrend, so I'd been telling you my bias was bearish, looking for shorts. I'd explained that this was a key turning point, and that waiting for a pullback to the doji before entering would set up a perfect short opportunity.

And in the end, gold played out exactly according to the scenario: a breakout of this doji, then a pullback, plus a clear, easy-to-read reversal candle formed, so the short entry chance we were aiming for arrived right on cue. Just as the scenario predicted, gold then went on to drop roughly 731 pips from there. In today's stream exclusively for Trading Lab members, I broke down what comes next around these three key points, including my full trading scenario.

First off, the correction to yesterday's strong downtrend looks like it's nearly finished, so my bias stays bearish. As long as price doesn't break above the recent high, I explained that this is a phase where I want to target a resumption of the downward move. And I said that only if price clearly breaks above the high, right here at this level, would I first start considering a switch to a bullish bias.

But since the doji candlestick we flagged recently in our community, we've only seen a weak rebound continuing. Right now, we can't call this a resumption of the downtrend, and we also can't say price is rising with any strong momentum behind it. So we're still in the assessment phase, and I think there will still be plenty of chances to enter a trade heading into the New York session open. That's all for today's gold analysis.