Trailing stop triggered; initiate short positions. The COMEX Gold saw a steep correction on Wednesday, erasing USD45.80 to settle at USD1,908.60. The precious metal opened at USD1,952.80 yesterday and tested the intraday high at USD1,962.50. However, sentiment shifted during midday and selling pressure emerged, which saw the COMEX Gold correct sharply to the USD1,902.60 day low. It last traded at USD1,908.60. The commodity is trading far apart from both the 20- and 50-day SMA lines. Just as we expected previously, the precious metal is due for a pullback to consolidate near the lower support. Coupled with the RSI indicator falling below the uptrend line, we think the correction phase has started. As such, we shift over to a negative trading bias.

Our previous long positions – initiated at USD1,859.10, or the closing level of 16 Dec 2020 – have closed out during the latest sessions after the trailing stop was triggered. Conversely, we initiate short positions at the closing level. For risk-management purposes, a stop loss can be set above the USD1,946 level.

Downside support is marked at USD1,878 and followed by 22 Dec’s low at USD1,863.70. On the upside, the immediate resistance is pegged at USD1,938 and followed by next hurdle at 5 Dec’s closing level of USD1,954.40.

Source: RHB Securities Research - 7 Jan 2021