Gold and Silver Prepare for Bullish Breakout

5 min read

Dear Traders,

Perhaps you noticed that Gold (XAU/USD) and Silver (XAG/USD) are slowly but surely showing signs of growth. During this year the golden metal grew by +13% in value and silver improved by +6%.

In fact, this article will show that both Gold and Silver could end 6 year corrections if they break above $1300 and $17.50.

Time for a closer look what to expect next in the upcoming weeks and months. (The video of this article is at the very bottom)

Gold (XAU/USD) Bull Break Could End 6 Year Correction

XAU/USD is challenging the resistance trend line (orange) that has been valid ever since the peak of Gold in September 2011 and its pullback in October 2012.

A break above this resistance point could indicate two major signals to the market:

  • The bearish correction back to the 50% Fibonacci (purple Fib) at $1085 could be over.
  • The uptrend is back into play and a bullish momentum could take price to the Fib targets (blue Fib) or even previous top.

Price is already above the trend line but has to confirm the breakout which it can do by:

  • Breaking above the previous horizontal resistance point at $1300.
  • Showing a strong breakout monthly candle of August with a close near the high. This makes it likely that a bullish breakout will occur in the next 1-3 months.

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Details for Gold Trade Setup

On the daily chart price seems to be ready for a bullish breakout as Friday’s daily candle show a major bullish reversal in intra-day trading. This created a large wick on the bottom of the candle.

Here are my thoughts how to tackle it:

  • Confirmation entry: the confirmation of the daily breakout occurs when a daily candle closes above $1300 with a strong candle close near the high (blue arrow).
  • Target: price could move towards the -27.2% Fibonacci target at $1341 directly or with a pullback (dark red arrow). An extension towards the -61.8% Fib target at $1400 is possible but a mild correction could appear at the -27.2% target.
  • Stop loss: the candle low of a strong breakout candle is a good place for a stop loss.
  • Failure to break: if price fails to break or shows a false breakout, then price will need to break below Friday’s daily low to confirm the bearish reversal and there is space to fall (red arrows) towards the 2 support zones which could cause a bullish bounce (green arrows).

Silver (XAG/USD) Revival Around the Corner

Gold’s ugly duckling seems to be ready for a recovery. Although Silver (XAG/USD) declined in value a lot more than Gold did since 2011, Silver is also showing potential for a bullish breakout.

Here are the key ingredients that support such an upside move:

  • The strong bullish wick (green arrow) of the July monthly candle is showing the bullish reversal potential.
  • Weakness of the downtrend to confirm a new lower low in the last 1.5 years.
  • Inverted head and shoulders reversal chart pattern (purple boxes).

XAG/USD will still need to confirm the reversal by breaking (blue arrow) above the resistance trend line (red). The bullish break will need to break above the moving averages and previous top, plus round level at $17.50, which could trigger a breakout towards the next resistance trend line (dark red) at the round level of $20.

Many green pips,

Chris Svorcik

More info on our ecs.SWAT course and trading system

Twitter: @EliteCurrenSea

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