Range trap: which side breaks first — and what confirms it | XAUUSD Nov 4

Hi, this is Daniel, your energetic prop trader. As of right now, today's gold is trading in a range. Since our last analysis, things played out exactly as planned, with the trading range continuing.

Price overshot our target low, then reversed sharply, and heading into the New York session open, we saw gold rally a full 757 pips. Right now, gold is still stuck in a directionless trading range, with no clear bias. On the daily chart, the broader downtrend hasn't broken, so for this range our base case is a breakout to the downside.

In today's analysis, I focused on which way this trading range will break out, and whether a clear direction then emerges from the breakout and pullback that follows. So, without further ado, let's start by taking a detailed look at the daily chart. Looking at gold, yesterday's daily candle closed as a bearish doji, with the open and close nearly equal.

That means the time-based correction we saw as the most likely daily scenario as of yesterday has actually played out. The candle is an inside bar relative to the one before it, the real body is small, and we can confirm that volatility is contracting on the daily timeframe, if only slightly. So compared with yesterday, I think we can say the timing of a breakout from this trading range is getting closer.

Also, as I mentioned at the start, the bigger-picture downtrend is still intact and hasn't broken down. The current market has been built as a bearish swing, a time-based correction, another bearish swing, a price-based correction, and then a breakout to the downside. So as long as we don't see any move signaling a bullish reversal, my base case is that price is likely to break below this small range.

That said, volatility was actually fairly high throughout the whole day yesterday. Even so, if you look at the actual highs and lows, candles 48 and 49 show almost no difference between them. So for today, I think the chances of a breakout during Japanese daytime hours, in other words the Tokyo session, are pretty low.

Next, let's move on to the 1H chart. This is where the 1H chart was positioned at the time of our last livestream, the one exclusively for Trading Lab community members. Here on YouTube, I'd like to focus on the key points and walk you through the technical analysis and the scenarios I explained at that point.

The first key point is about market bias. During the livestream, I explained that based on the daily chart, this was a phase where a trading range was likely to form. Then, looking at the London session candle, this one right here, price had just finished reaching the measured move of the double top formed by the highs of the previous day's New York session and today's Tokyo session.

So I explained that from here on, we wanted to be cautious about a reversal. And if it reversed, the first level it would most likely test was, since this was a spike and channel downtrend, so price would probably retest the start of the channel. Then, if the follow-through was strong, the Tokyo session high and the daily high were almost at the same level, so that area was likely to get tested.

But as the overall flow, no matter how strong the follow-through was, the day as a whole was likely to become a trading range, and in the end I said we wanted to prioritize that a downside breakout was more likely. Also, as usual, I went through the price action that led up to this point. So where did I start the explanation from?

It was this sideways trading range right here. We also got a question about it in our Trading Lab community, so I laid out the whole sequence of price moves leading into this area step by step. First, let's look at this sideways range during the New York session on the 2nd.

Right at the New York open, price broke out to the upside, and the follow-through was strong. But there was no pullback after the breakout, so it never developed into a setup where we'd enter a trade. We also covered this in detail in our Trading Lab community.

Take these two candles. Viewed on their own, they show very strong momentum. But if you look at the price action to the left, the process leading into it, a downtrend was already underway with even stronger momentum, so even reading them as strong as possible, these two candles are only about fifty-fifty in strength.

When similar selling pressure and buying pressure are both at work, a trading range will very often form naturally. Following that flow, price eventually printed a high and then came back down into the range. So that's exactly how the flow unfolded here on the chart.

After that, the follow-through continued into candle 4 of the New York session, and candle 5 was the second bearish reversal bar. From there price turned, and candle 8 formed a doji. At the Tokyo session open, price tried to break out to the upside, but the breakout pullback failed.

Counting here and here, that's a second bearish reversal bar, forming a double top with a slightly lower second high. Then on candle 4, price broke out to the downside through this doji, completing the bearish spike. After that, a channel trend carried on right up to the time of the stream.

Given that the daily chart tends to form a trading range, we then got a bullish reversal bar right at the bottom of the trading range, at the level of this week's opening low, and overshooting this channel. And after the stream, following that bullish reversal bar, gold played out exactly as the scenario expected, with the trading range continuing from the London session onward. Then at the New York session open, we got upside follow-through, and once it kicked in, price surged sharply, rallying roughly 754 pips in a very strong upside move.

And the price action since then has also played out completely according to the scenario. Just as I mentioned earlier in the analysis, gold tested the previous day's daily high, in other words the high as of yesterday, and the Tokyo session high, then reversed right there. As things stand, it has now erased almost 60% of that whole rally from the New York open.

In today's analysis for Trading Lab members, I broke down the upcoming scenario based on these three points. First, the trading range has continued since the previous day, and the market has no clear direction. Second, looking at the Tokyo session open, the upside momentum was weak, so I explained that there's a high chance the trading range will keep forming.

As I mentioned earlier, even when a bullish-looking candlestick forms like this, the price actually comes right back down. So far, the market is moving exactly according to the scenario. In Trading Lab, I explained the scenario: we'll confirm the move after price clearly breaks out of the trading range, and then judge the next direction.

Now let's turn our attention back to the real-time chart once again. At the Tokyo session open, price formed a bullish doji candlestick, so the structure shows no clear sense of direction yet. Even if this looks bullish, the daily chart is in a shape that easily forms a trading range.

So if you carelessly jump on the initial move, you'll be forced into a very wide stop loss. That's why, as much as possible, I want to wait for a breakout and pullback first, and then ride the next direction with confidence. That's all for today's gold analysis.