GOLD: Swing Trade Analysis with Volume Profile

Today, I would like to do a swing trading analysis using just Volume Profile and Price Action.

What got my attention this time was Gold. Its price has been rising and it hasn’t been this high for 7-8 years!

As the price is moving upwards there are zones where the Volume Profile shows heavy volumes. Those are most likely areas, where buyers were adding to their long positions. They are around 1755.00 and 1728.00.

Two factors which drive the price up from volume-based supports

Those heavy volume zones should work as Supports. Why? Because the buyers who were building up their positions in those zones won’t want the price to drop below those zones. That would mean their positions would be in red numbers!

So, when the price reaches those volume zones, then the buyers will want to defend those zones. They will start aggressive buying in order to drive the price upwards again.

There is also a second factor at play. When there is a pullback, then the sellers behind this pullback will want to quit their short trades before they reach the heavy volume zones. Holding to those positions could mean a potential fight with the buyers! They wouldn’t want that!

Sellers getting rid of short positions means they will need to buy (to get rid of shorts). This is the second factor which could help drive the price upwards from those two heavy volume zones.

So, the two factors to drive the price upwards from volume-based supports are:

First factor: buyers defending long positions.

Second factor: sellers getting rid of their short positions.

Both factors help the price turn upwards at the volume based support zones like these.

You can see the heavy volume zones on 4 Hour chart of Gold below:

Trade execution

What do we do now? Now we simply wait. When there is a pullback and the price makes it back to those zones, then they should work as supports. Then it could be a nice opportunity for a swing long trade from both of those supports.

Gold specifics

Gold is a bit specific trading instrument because it often works as a safe heaven instrument. This means that when there  is some global uncertainty (economical crisis, coronavirus, war, disaster,…) then its price usually rises. On the other hand when it is over its price drops.

So, if there is some really important global news then you should watch Gold and trade it carefully. Especially when it is moving around its all-time highs like now.

I hope you guys liked today’s analysis. Let me know what you think in the comments!

-Dale

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EDIT

This is how it went the next day:

Trading the Sell-off on Gold

Gold hit a major long-term resistance which I wrote about a month ago. Despite all the uncertainty around the world (which should actually help gold to strengthen) there was a nice reaction to this resistance and a sharp sell-off.

You can read the reasoning behind the resistance here:

A MAJOR Resistance On Gold

To me, it appears that the selling on Gold has just started and it might continue in the future.

Below is a Daily chart of Gold with the resistance I predicted and the reaction.

What happened around 1665

Let’s now zoom in a bit and let’s have a look at what actually happened around the major long-term resistance (1665). I will explain on a 30 Minute chart.

First, the price went upwards and hit the resistance. Then there was a rotation around the resistance and then an aggressive sell-off started yesterday.

If you look into the volume distribution (picture below) within this whole area you can see that there were heavy volumes accumulated in this rotation. There were two significant volume zones. I marked the stronger one in the picture below.

What happened here was most likely this: Buyers were pushing price upwards, then when the price hit the long-term resistance around 1665 sellers started actively accumulating selling positions (that’s the heavy volume areas we see below). After a couple of days the sellers entered their selling positions and then they started aggressive selling to start the sell-off which occurred yesterday.

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Resistance around 1636

Now when you know the bigger context I would like to talk about a resistance which formed just yesterday around 1636.

There are several things I like about this resistance and I will cover them one by one:

First, there was a tight rotation with quite heavy volumes accumulated around 1636. Then strong sell-off started from there. This indicates that sellers were adding to their selling positions there and from this place they started their aggressive sell-off. When the price hits this area again those sellers are likely to become active again and to push the price downwards again.

Another thing I like about this 1636 area is that the heavy volume cluster (from the picture above) was also at this level. This means that around 1636  the sellers from the last couple of days accumulated most of their selling positions there.

The third thing is that this 1636 area worked as a support in the past. The price bounced twice off this level. When the price went through this support yesterday, it then became a resistance. More about this setup here:

Support→Resistance Price Action Setup

So, we have three nice confluences that all confirm this resistance. You can see it all in the picture below (Gold; 30 Minute chart):

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How to trade this?

There are two ways you could consider trading this. First, as an intraday trade where you would enter the trade with a tight Stop Loss and then quit it relatively soon.

Or if you haven’t managed to get into a long-term short trade around the 1665, then this might be your second chance to enter such position from a pretty good level. This way you wouldn’t be chasing the market but you would wait until it comes back to you – back to a price where it actually makes sense to press the SELL button.

I hope you guys liked this article. Let me know what you think in the comments below!

Happy trading!

-Dale

 

PS. As always guys, this is not a trading recommendation. Only my own opinion. It is all up to you what you trade and how you trade it. Your own decision and your own responsibility.

GOLD – Intraday Trading Analysis With Volume Profile

The previous week I wrote about the importance of the big picture analysis. I did a long – term analysis on Gold using Weekly charts and Volume Profile.

You can read this analysis here:

GOLD – The Big Picture

Now, I would like to zoom in a bit and analyze Gold on a much lower time frame (30 Minute). This will point us to intraday supports/resistances which are currently there.

Price Action analysis

Let’s first start with simple Price Action. Currently, there is an uptrend on Gold. It looks like this:

When there is a trend development like this, then I like to use my Flexible Volume Profile on the trend area. My goal is to see significant Volume Clusters which got accumulated in the trend.

Volume Clusters

What does a Volume Cluster in a trend mean?

Volume Cluster is an area, with heavy volumes. You should be able to spot them easily with Volume Profile. They should be visible on first sight. Nice and clean, that’s what we are looking for.

When there is a Volume Cluster (or more of them) created in a trend, then it means that heavy volumes got traded there.

In this case, there is an uptrend. Volume Cluster in an uptrend means this:

Buyers are pushing the price upwards and there are places, where those buyers were adding massively to their buying positions (that’s where we see Volume Clusters). Then they drive the price even higher.

Below, you can see the same chart as I have already shown you, but this time with Flexible Volume Profile.

XAU/USD; 30 Minute time frame:

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GOLD: Intraday Supports

In the picture you can clearly see three significant Volume Clusters. Those were areas where buyers were entering most of their buying positions.

What will happen when the price turns and makes it back to those three areas?

Chances are, that those buyers who were building up their buying positions there will become active again. They will try and defend those areas (defend their positions), and they will try to push the price upwards from those areas.

This is why those three Volume Clusters should work as significant (intraday) supports.

Does it matter when the price makes the pullback to those levels?

Well, in my experience markets have really good memory. So it does not matter that much.

Those three Volume Clusters should be strong Supports even after few weeks after they got formed!

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I hope you guys liked my intraday analysis.

Please let me know what you think in the comment section below!

Happy trading!

-Dale

A MAJOR Resistance on GOLD

I received quite a lot of emails from people asking me to do an analysis on Gold. I am not surprised by this. Gold prices are surging again and people are getting interested (again).

Today I am going to do a big picture analysis and point out the most important support and resistance zones.

The BIG picture

If you want to do an analysis of any trading instrument, it is always best to start from the big picture. By the big picture, I mean THE BIG picture!

In this case, I pulled 10 years of data and printed it on the Weekly time frame.

This allows me to see the complete BIG picture.

The next thing I did was that I draw my Flexible Volume Profile over the whole 10-year area.

Result? A 10-year Volume profile with two really clear heavy volume zones. Those are the most crucial areas in the whole 10 year period!

And the most important zones in those two heavy volume areas are the places where the volumes were the heaviest. Those are the volume peaks or you can also call them “local POCs“.

One is around 1665.00 and the other is 1285.00

You can see this on the Weekly Gold chart below:

 

Support at 1285.00

Let me first talk about the 1285.00 area.

As you can see from the picture, there was a very long rotation (2013-2016). I remember that when Gold started rotating there, people started to lose interest in it.

You know, this is funny. In rotation like this big financial institutions are building up their positions, getting ready for an action and what the rest of retail traders do? They lose interest. They get interested again only when there is a strong trend. But at this point it is usually late! This is something to think of! But let’s now get back to the topic!

So, from this long rotation price finally shot upwards. What does this tell us? That it was mostly buyers who were accumulating their positions in the rotation!

When the price re-visits this area again, it is pretty likely, that those buyers will become active and aggressive again and that they will drive the price upwards.

This is why I think that the Point of Control (POC) of this area is a really strong support.

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Resistance at 1665.00

Now the price is going aggressively upwards. Lots of people finally realized there is an uptrend and that they would also like to have some piece of the cake.

We who use Volume Profile know, that this idea is pretty risky.

The reason is that the price is heading towards a major volume based resistance.

If you look at the Weekly chart again, you can see that there was a strong rejection of higher prices in the past.

This means that in 2010 the price went aggressively upwards, then a rotation started (2011/2012) and then a sell-off (which ended in 2013).

There were pretty massive volumes accumulated in the rotation before the price changed its direction (2011/2012). Sellers were building up their selling positions in this rotation and then they pushed the price downwards into a new trend.

Currently, the price is getting near this heavy volume area again.

Even though it has been 8 years since the price was at those levels, I still believe that there will be a reaction.

Where exactly? The most important place in this heavy volume area is in it’s POC (1665.00). This is the place with the highest probability of a strong reaction.

 

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How to manage such trades?

If you like this sort of long-term analysis and long-term trading, then you need to remember that for such trades you need to have wide enough Stop Loss and Take profit.

I am not going to tell you where to place it, but with time frames like these (weekly or monthly) you need to let the trade breathe and develop! You cannot expect an immediate reaction.

Want to learn more?

If you found this interesting, you may also like to read another two articles I posted here about this sort of long-term trading:

How To Plan Long-Term Investments With Volume Profile

A Story Of A +1,600 Pip Trade

I hope you guys like this analysis and that you found it helpful.

Have a GREAT weekend and I will see you on Monday with a new Weekly Trading Ideas Video!

 

Happy trading!

-Dale