Gold at 4,207 overshoot — resume rally or pull back to 4,146? | XAUUSD Oct 9

Hi, I'm Daniel, an active prop trader. Today my short-term bias on gold is bullish. Since last time, price broke out above the previous day's Tokyo session high, which was my criterion for switching bias, so I needed to switch my outlook over to bullish.

After that breakout, price formed a big bullish candle and rallied the equivalent of 641 pips up to the recent high. Even now, after that large upward spike, the uptrend is still continuing within a channel, but Recently price overshot this level, so from here we should watch out for either a time-based correction or a price correction back down to the previous day's high. Will price resume its rally after a time-based correction, or will it reverse off the channel and head back down to test the previous day's high?

That's the key point I focused on in today's breakdown. Alright, let's jump right in and start with the daily chart. On the daily, yesterday closed as a small bullish doji-style candle.

Now, on the daily chart I shared a scenario yesterday. So what did I tell you? First, the previous candle had closed as a bearish candle.

However, look at where that bearish candle's body actually closed. It got pulled back inside the range of the doji candle just before it, almost like a magnet effect, so We can't confirm any volatility contraction, and no reversal pattern formed. In terms of actual price action, the previous day closed as a small bullish doji candle on the daily chart.

Looking at this price action, the most reasonable read is that the market first came to test the lower edge of the trading range, so by the textbook, the natural next step is for price to go test the upper edge of the trading range. And in fact, it's broken above the previous day's high, and the daily candle is now on track to close with a solid bullish body. It's Friday, so there's some position squaring, and how the daily candle closes matters.

Either way, the strategy stays the same. The daily chart has no clear direction. See the daily range in the gray zone?

We should wait for a breakout, then a pullback, before planning any entry. Even if we tried to trade inside this daily range, the proper entry point would be just above the previous day's high. That's where we'd need to open a long position at that breakout timing, and then hold that trade all the way up to the top of the range.

But since the breakout is already in progress now, either way, on the daily chart this is still not a situation where we should be planning an entry. Alright, now let's drop down to the 1H chart. Yesterday's livestream for Trading Lab members took place right where this vertical red line is drawn, a members-only session.

Here on YouTube, I'll walk you through the commentary and scenario analysis we gave Trading Lab members, sharing it just as it was presented, and that's how we'll proceed today. First, looking at the previous day's 1H chart, if we check the chart as it stood at the time of that session, we could see that the rebound following a strong downtrend appeared to have ended. So our basic bias was bearish, and our view was that price was dropping from this bearish reversal candle here.

So the level that would switch our bias is this high right here. Basically, unless price clearly breaks out beyond this high, which also happens to be the previous day's Tokyo session high, we stay with a bearish bias. And what I was explaining in the analysis was that, right now, the most appropriate reading is that the corrective rebound within this downtrend has already finished.

Also, as for the shape of the rebound, there was a chance that price would retest the same high during the London session and form a double top, so I covered that too as one of our bearish scenarios in the analysis I shared. On the other hand, for the bullish scenario, it was pretty straightforward. Our current bearish bias was defined by this Tokyo session high level, so I explained that if price broke cleanly above it, we'd flip our view and switch to a bullish bias on gold.

If we flipped to a bullish bias on gold, I said price would first come up to test this key level here. And if it ran lower instead, we could also see a move to test the previous day's low, but Given the situation, the previous day had been a really clear downtrend day, so considering that momentum would likely weaken, my explanation was that we'd swing part of our position all the way down to this level here. That was the scenario I had in mind the day before, and let's follow how the market actually played out after that.

Oh wait, not after that, actually. I also walked you through the technical analysis in detail, leading up to that point on the chart. Right from this point, exactly as in the scenario I laid out two videos ago, the plan was to wait for a breakout pullback against this doji candle and then enter a short position here, Sure enough, once the breakout pullback against this doji candle was confirmed, a setup formed and price dropped, and a small reversal candle formed right here, but Don't forget this: when the trend is clear, a reversal candle in the opposite direction often turns into a good trend-following entry.

Here too, it actually broke below the bullish candle with a big bearish one. Now, about this big bearish candle: I think we can fairly treat it as a so-called selling climax candle in this whole move down. Within a series of downswings, if one candle stands out as an especially large bearish candle, it may be the climax candle of that whole move down.

We've covered the structure of climaxes several times in our community, so if you have more questions, feel free to post them in the question room. Next, after that, a bullish reversal candle formed, producing only a weak rebound in price. A bearish reversal candle formed, but no downswing followed, and then a bullish reversal candle showed an even weaker rebound.

This was probably the final bearish reversal candle, the second one, so at that point it looked highly likely a downswing would form again, but So in the end, let's look at how gold actually ended up moving after all that. Here's the gold chart, including the current live rate as of this recording. In the end, price broke out above the Tokyo session high we'd marked as an important level, so it became a move where we had to switch our market bias.

From this breakout point, price climbed about 641 pips. That took us right up to today's Tokyo session high, set about two hours before London opened, at 4207 dollars, a gain of around 641 pips in total. Also, as for how to trade this swing move, I broke down the exact entry points in detail today inside our Trading Lab community.

Now, for today's scenario, inside our Trading Lab community I walk through the full gold scenario using these three key points. After breaking yesterday's high, the uptrend continued, so we're bullish. Second, the rally has extended a lot, so stay alert for a time-based or price-based correction.

Third, if the recent bullish structure breaks, switch to a short-term bearish view. How far it could fall, I covered at the start. For exactly which moves to target, I explain it in detail inside our Trading Lab community. That's all for today's gold analysis.