Keep short, as the bears still dominate market sentiment. The COMEX Gold posted a USD3.50 gain to USD1,260.20 last Friday. It charted a white candle that covered the body of the prior black one. As a result, a reversal “Bullish Engulfing” candlestick pattern was formed, which implied that the current correction had neared its limit. Nevertheless, until a firm positive follow-through is in sight, we believe the commodity is merely taking a breather. This is viewed as a normal reaction, especially after the COMEX Gold dropped to a YTD low last week. The bears are presently dominating market sentiment.

The daily chart suggests the correction is still in play. Technically speaking, it is best that traders maintain short positions, with a trailing-stop pegged above the USD1,286 threshold. This is in order to secure part of the trading profits. For the record, we initially made the short recommendation on 16 May following a firm breach below the USD1,309 mark.

Our immediate support is maintained at USD1,238, or the low of 12 Dec 2017. The following support is pegged at USD1,217, which was the low of 9 May 2017. On the flip side, we set the immediate resistance at USD1,263, or the low of 27 Oct 2017. In the event the price breaches above this level, our next resistance is found at USD1,286, ie 21 May’s low.

Source: RHB Securities Research - 2 Jul 2018