Gold fully retraced the drop — does the high break or reverse? | XAUUSD Oct 15

Hi everyone, I'm Daniel, an active prop trader. Today, my short-term bias on gold is bullish. Since last time, price broke out to the downside of the doji we'd been watching closely, and that decline just kept going, with gold falling a full 965 pips since my last broadcast.

Right now, price has fully retraced that sharp drop, and we've also spotted a bearish reversal signal at the recent high. So this is a moment where we need to judge carefully whether gold continues higher or forms a second downside swing. So the key question is this: will gold break out above the recent high and extend into a strong uptrend, or will it reverse and form another big downside swing?

That's what I focused on in today's analysis. Now, let's dive right in and take a detailed look, starting with the daily chart. First off, on the daily chart, gold's candle from the previous day closed as a bearish candle.

Now, the daily scenario I laid out yesterday was this: the candle before that had closed as a bearish doji, and just as the scenario expected, price has kept moving in a sideways trading range, building off that prior doji candle, which is the situation we were in. So for yesterday too, I explained two things. First, a sideways trading range was likely to continue, using this candle and this candle, these two candles, as the reference candles.

Second, given the flow at that point, the previous day's high and low were likely to work as key levels for counter-trend entries, where price tends to reverse. In the end, yesterday's daily candle closed as a bearish candle, breaking out to the downside from the doji right before it. So if price breaks this low and then pulls back up to retest it, that's a setup where I'd also want to consider a short entry at the daily chart level as well.

On the other hand, if you look at where yesterday's bearish daily candle finally closed its body, it settled at a level where you could also read it as price returning back inside the daily range. So if today forms a bullish candle and works like a strong bullish reversal candle, we could see price try to test the high of this candle, and the flow would shift, by the book, from the bottom of the range toward testing the top of the range. That's what I'm watching on the daily chart.

Now let's drop down a timeframe and look at the 1H chart. Yesterday, during our Trading Lab members-only stream, price was at this bullish 1H candle. The third 1H candle of the Tokyo session had just closed.

So what technical analysis and trading scenarios was I explaining around this point? Here on YouTube, I'll focus on the key points and keep going with the breakdown. First, looking at the most recent price action, I was thinking that the breakout direction of this doji candle here is very likely to decide where the market heads on its next move.

Also, this doji candle can be seen as a second test of the low that was set toward the close of the previous day's New York session, and if we trace the whole downswing that has played out up to this point, it had overshot the channel line, which made this a candle with a high chance of reversal, so I was thinking there was a strong likelihood that price would break out above the doji afterward. If this candle breaks out above the doji, the bias clearly turns bullish.

On the other hand, if price breaks out to the downside after this, then naturally, since it formed a doji candle here, the bias turns bearish instead. In that case the bias turns bearish, and judging by the size of this doji, the setup showed price was quite likely to fall to around 4120 dollars. In our Trading Lab community, I've explained in detail the price action that led me to both the bullish and bearish scenarios.

Actually, in the video before last, which was a stream exclusive to our Trading Lab community, I covered the price action right up to this point, so let's pick up from here. First, let's look at this sideways range. A doji formed here, which ended the upswing.

Then the second candle was a bearish doji, and since price failed to break above the high, a sideways range formed using these two candles as the reference bars. The final breakout actually started from this candle right here, but in practical terms, I'd say this outside bar was really the key entry point for this short trade. First, a bearish candle formed here and broke out below the trading range, but follow-through was weak, so the outside bar reset things once again.

Then price broke below that outside bar, and the bias turned bearish, and in the end, the down swing continued all the way to this bearish doji, then price dipped just slightly below the recent low, where a bullish reversal bar formed. However, the follow-through after that bar was weak. Because the down swing had been so strong up to this point, the entry bar closed as a bearish doji, and after that, price resumed its downtrend within a descending channel.

Still, it's a fact that this bullish reversal bar formed, so the bulls would most likely look to set up their entry when this low gets tested for a second time, I think, And the spot we can read as that second test turned out to be this doji, which also closed as an outside bar, so the breakout direction was easy to judge, and that's where things stood when the stream went live. So that was the setup. As for how the market ultimately played out from there, price broke out to the downside of this doji, and then a breakout pullback formed as well, retesting that level.

Counting from the time this analysis went live, that's a move of 969 pips. In other words, gold dropped a full 96 dollars from there. Now, after putting in a low during the New York session, gold reversed and rallied hard in the Tokyo session.

For what comes next today, I've broken down the scenarios around these three key points inside our Trading Lab community. First, the drop is fully recovered; watch for a reversal off the recent high. Second, short term bullish, but switch to bearish on a confirmed reversal.

Third, at the New York session open, I explained we'd reset to a neutral bias first and then reassess from there. Right now, a second bearish reversal candle has formed, and price is trying to test the Tokyo session high at 4161 dollars. If another reversal candle forms from here, I'd personally like to switch to a bearish bias until the New York session. That's all for today's gold analysis.