Gold's uptrend or a wedge trap — the one level that decides it | XAUUSD Oct 16

Hi everyone, I'm Daniel, an active prop trader. Today my bias on gold is bullish. Since the last video, the uptrend has continued, and we've seen price climb roughly 290 pips after that analysis went out.

Right now, the uptrend is still intact, and price has broken out above the most recent outside bar. If momentum strengthens from here, I expect the market to keep pushing steadily higher and higher. So will this uptrend simply continue as it is, or, and this is one concern I see in the current market structure, will it form a wedge pattern and then flip into a sharp drop?

That's what I focused on in this analysis. Alright, let's jump right in and start by looking at the gold daily chart. Okay, yesterday's daily candle on gold closed as a big bullish candle.

In yesterday's YouTube video, the daily scenario I shared started with the prior candle, which was a bullish one... no, not bullish, actually, Sorry about that, I misspoke, it closed as a bearish candle. And it had broken out to the downside below the doji candle just before it.

Given that setup, in that video I explained that if price came back up for a so-called breakout pullback, a retest of the area near that doji's low, we could consider setting up a short entry on the daily timeframe. However, if you focus on the body of that previous bearish candle, you can see it got pulled back inside the daily range, the so-called magnet effect, which we can clearly confirm here, so If today's daily candle, meaning yesterday's daily candle, closes as a bullish candle, then from here it's highly likely to at least test the upper edge of the range, just as theory suggests, and One key reference is that we could also see price move to test the

high of this doji, and as for the key points to watch on the daily chart for both the bullish and bearish scenarios, I believe I mentioned that I wanted to drop down to a lower timeframe and watch whether price could form a bearish reversal or a clear chart pattern around the low of this doji, using that low as our key reference level. That was what I was talking about, and as I mentioned a moment ago, yesterday's daily candle closed as a strong, large bullish candle.

What this tells us, first, is that we got a strong bullish reversal candle that completely negates the previous bearish candle. So on the daily chart, I'm keeping a bullish bias, and even if the trading range continues from here, I think we should be prepared for price to try and test the high of this doji candle. So rather than taking counter-trend shorts near the high, given the daily chart, it's better to focus on long setups even on the shorter timeframes.

And if you can accept risk down to the low of the previous candle, a long entry on the daily chart is also quite possible here. On the other hand, we should also watch closely for a breakout below this candle. That move tends to sweep the stop loss orders placed by the previous day's bulls, so if price breaks below the prior daily candle, I think we need to be very careful about a sharp, strong-momentum drop that could follow.

Next, let's take a look at the 1H chart. Right here, this red vertical line marks where the 1H chart was when I did yesterday's members-only live stream for Trading Lab. So what did I explain at this point about the technical analysis and the trading scenarios for gold?

Here on YouTube, I'll focus on just the key points and walk you through them right now. First, the basic setup here was that gold had been forming this strong upward swing on the chart, but let's look at what happened right before that upswing started. That downtrend from the New York open dropped sharply in a very short time, and price ended up almost completely retracing that entire decline.

This kind of retracement follows a certain pattern, and it's something we often break down inside the Trading Lab community, First off, inside this upswing, we'd seen bearish reversal candles form twice, a first one and then a second one, so and I'd explained that the key focus was whether this second bearish reversal candle in particular would actually play out because in most cases, after a sharp drop gets retraced, a second bearish swing tends

to form from that point, so I mentioned that if price reverses from this level, I'd want to consider a short, and then on the chart, the most recent candle had formed a bullish reversal pattern, so I said that in the short term my bias was to the upside, and that if price broke out to the downside below this candle, you could look to enter a short position, expecting follow-through selling momentum. From here, if price goes on to break above this high right here, there's a chance it could develop into a strong, sustained uptrend, but right now we're still in a wait-and-see phase, so I explained that holding positions for a long time is high risk.

Also, I explained the whole sequence of price action on the chart leading up to this point. And this is the exact point on the chart where I gave yesterday's analysis. Looking at the price action from this point, here, this is the second hourly candle after the Tokyo session open.

It formed an extra-large outside bar that was also a doji, and then, after the upside breakout attempt failed, price reversed lower. This candle broke out to the downside, and after follow-through continued, it formed a breakout pullback near the high of this big bearish candle. After that, strong follow-through came in on that very same candle, so trying to plan an entry using the 1H chart alone was probably impossible, but the price ended up selling off steadily lower, like this.

Now, the downswing finally ran all the way to this bullish reversal bar here, and you could go long above the high of this bullish reversal bar, but But the first upside follow-through bar formed as a doji. So the real first bar of the upside spike is actually the next one, the breakout bar, and that's what we'd typically call a trend bar. It forms a big bullish candle, then the upswing runs on.

And the Tokyo open saw even stronger buying, which is an unusual pattern. That's how the price action played out here, and eventually, once this second bearish reversal candle formed right inside this same upswing, It wiped out nearly all of that sharp selloff from the previous day's New York session open, After that, price formed a down swing and then printed a bullish reversal candle, and again, right here, inside what looks like the price zone that formed a so-called FVG, it printed a bullish reversal candle, so based on that I said my short-term view was bullish, looking for upside.

So how did the market ultimately end up moving after that? Well, just as I called it with my short-term bullish view, after the stream ended, gold climbed a clean 29 dollars, or 290 pips, printing three consecutive bullish candles on the 1H chart. I think it played out broadly in line with our scenario.

In today's Trading Lab members-only stream, I covered the scenario using these three points. First, the uptrend remains intact, so I'm bullish for now. Second, if bullish momentum builds, the trend could accelerate further.

Third, while the rally continues, the trend structure also warns of a sharp drop. We study the exact price action for those calls in Trading Lab. That's all for today's gold analysis.