Stay short, in line with our bearish view. The COMEX Gold dropped USD11.10 last night to USD1,250 and left a black candle. This indicated the session was led by the sellers. There is no change to our negative view – although a positive momentum was seen in 14 Jul’s reversal “Bullish Harami” candlestick pattern, no strong positive follow-through has been sighted. This suggests the bulls are still unable to wrest control from the bears. In addition, the 14-day RSI indicator is fluctuating below the 50-pt neutral level at 33.33 pts. This implies market sentiment is weak, thereby enhancing our bearish view.

As we believe the correction is still in play, it is best that traders maintain short positions. In order to lock in some of the trading profit, we advise setting a trailing-stop above the USD1,286 threshold. This is in line with our initial short call on 16 May after the COMEX Gold plunged below the USD1,309 mark.

To the downside, we set the immediate support at USD1,238, or the low of 12 Dec 2017. For the next support, look to USD1,217, ie 9 May 2017’s low. Towards the upside, we maintain the immediate resistance at USD1,263, which was obtained from the low of 27 Oct 2017. This is followed by the USD1,286 resistance, which is located at the low of 21 May.

Source: RHB Securities Research - 12 Jul 2018