Market sentiment is weak, stay short. At the end of last Friday’s session, the COMEX Gold registered a USD5.60 loss to USD1,246.40 and left a black candle. Despite the appearance of a positive momentum in 14 Jul’s “Bullish Harami” candlestick pattern, no strong upside follow-through was sighted. This reflects a still weak market sentiment, and the commodity may still retrace further. We note that the 14-day RSI indicator has yet to hit the 30-pt oversold level at 32.48 pts. This suggests there is still room for the downside movement to extend further, thereby enhancing our bearish view.

Based on the daily chart above, we believe it is the sellers who are in control of market sentiment. As such, traders are advised to stay in short positions, with a trailing-stop pegged at above the USD1,272 mark. This is so that some of the trading profits can be secured. For the record, we made the short call on 16 May, following a firm breach below the USD1,309 level.

The USD1,238 mark, ie 12 Dec 2017’s low, is maintained as our immediate support. If this level is taken out, the following support is found at USD1,217, or the low of 9 May 2017. Towards the upside, we set the immediate resistance at USD1,272, ie the high of 9 Jul. This is followed by the USD1,286 resistance, which was derived from the low of 21 May.

Source: RHB Securities Research - 16 Jul 2018