Short-term bounce or trend resuming? The signal that flips the bias | XAUUSD Oct 26

Hi everyone, Daniel here, an active prop trader. Today on gold, my short-term bias is bullish. Since the last video, price formed a lower high, then the downtrend continued, with a sharp decline of roughly 584 pips now confirmed on the chart.

Right now, a short-term bullish setup has formed, but the bearish bias on the daily chart hasn't broken, so I basically see this as a correction within the larger downtrend. So in this video, I focused on whether the short-term rally keeps going, or whether a bearish reversal pattern forms and price resumes moving in the daily chart's downward direction. So let's jump right in, starting with the daily chart.

The final daily candle of last week, on Friday, ended up closing as a bearish doji candlestick. Even though we're calling it a doji, the bearish body is actually fairly large, and both the high and the low stepped down from the previous candle. So basically, we can read this as a follow-through of that big bearish candle right before it.

On the other hand, one notable change is that bar 49, the daily candle from last Friday, is clearly much smaller in size than bar 48, the candle immediately before it. Since it's also a doji candle, this is basically a phase where I'd consider a shift into a time-based correction. Also, if today's daily candle flips around and closes as a bullish reversal candle, I wouldn't read that as the start of an uptrend.

Instead, I'd first treat it as a shift into a price-based correction phase. That wraps up the daily chart, so let's move on and take a look at the 1H chart. So, this red line right here marks where the 1H chart was sitting at the time of our community-only broadcast at the end of last week.

After the second candle of the London session closed, we did a Trading Lab members-only breakdown of the 1H chart. Here on YouTube, I'll walk you through the key points of the technical analysis and trading scenarios I covered at that point in time. First, in terms of bias, what I shared was that strong downward momentum was still driving the ongoing downtrend, so my basic view on gold was that it remained bearish, and I was mainly looking to the downside.

Until we get a clear trend change and a full reversal pattern, I'd avoid counter-trend trades, until all the clear warning signs of a trend change and reversal are fully in place, like price action, overlaps, channel overshoots, and higher lows, I explained that you shouldn't switch to a bullish bias on gold so easily. And as of this broadcast, the previous day's daily candle low and the Tokyo session high are likely to act as important levels, and if price breaks above these levels, we'd first consider a shift into a price-based correction of the downtrend.

However, I said not to switch to a bearish view on that alone, and to keep waiting for a clear trend reversal first. And for the price movement since the stream before last, I've also walked through several key price action points along the way. First, from here: the bearish pin bar with a long lower wick on candle 6 in the Tokyo session, and then the bullish doji candle with a long upper wick formed at the London session open.

These two candles served as the reference candles, and a sideways trading range had formed, but then in the London session, candle 6, a big bearish candle, broke out lower. However, that failed, giving us the first false breakout, a failed breakout to the downside. A big bullish candle.

It formed at the New York session open, so the downside breakout failed. But then, the second 1H candle after the New York open tried the downside breakout again, and this time, it looks like follow-through is confirmed. When a false breakout is followed by another false breakout like this, In my experience, price then very often ends up moving in that direction, so you can enter a short with a market order either below this low or right after the 1H candle closes beneath it.

So that's my breakdown of one short setup on the 1H chart. After that, a bullish doji formed, so a break below its low is naturally another short entry point on this 1H chart. Because this downtrend has such strong bearish momentum, that doji can really become a good short setup for us.

In fact, bar 5 broke out to the downside, then bar 6 gave a breakout pullback, and on top of that, solid follow-through was confirmed, Bar 2 is a bullish doji, and it's actually an outside bar, This one also broke out to the downside, then formed a bullish reversal bar, and started making higher lows, but it still couldn't break above this high, and that's where we were at the time of the broadcast. So our bias was still to the downside, but let's look at how price actually ended up moving.

Price formed a rally high, and after the broadcast we can confirm it dropped about 58 dollars, roughly 584 pips, exactly in line with our scenario. After that, price clearly tested the low twice during the second hour of today's Tokyo session before reversing, This reversal process here also played out just as our scenario expected. So today, for Trading Lab members, I've laid out the upcoming scenario breakdown using these three key points.

First point: price has broken above the recent trading range, so short-term we're bullish. Second point: upside momentum is weak, and the daily downtrend continues. Final point: if a clear reversal is confirmed, watch closely for the decline to resume lower.

Today's key point is to stay alert for a shift in our short-term market bias, And if price turns lower, quickly switch your bias and start looking for short entries, because for now we're only in a short-term bullish setup. That's all for today's gold analysis.