FxWirePro: Bears in gold push gains back to baseline of descending triangle - Hedge gold via option combination

No doubt about the baseline of gold's descending triangle pattern holding strong support but we believe, often and often we see bears trimming golds recent gains.

Today even if it makes an attempt of jump above baseline again (at 1058 levels) but bears could not resist to hold day highs (1068) to push it southwards.

No surprise if the yellow metal hits at 1000 (spot) marks slipping towards 78.6% fibo targets.

While RSI still evidences downward convergence with sharp declines both on weekly and monthly charts (Currently, trending around 36.1189 while articulating), so this indicator justifies current prices dips.

To substantiate these price slumps, slow stochastic curves view on weekly charts signifies to remain in sync with the standpoint offered by RSI.

%D line crossover is maintaining even below 20 levels which is oversold zone bolsters more selling pressures, (Currently, %D line is at 13.9202 and %K at 7.3988 while articulating).

Hence, contemplating above technical indications, it is advisable to short rallies for targets of 1030.10 or even up to 1000 levels on medium term basis with strict stop loss of 1070.50 levels.

Hedging outlook: Combinations (XAUUSD)

When above technical reasoning bothers your trade sentiments, the strategy is for those who have this commodity exposure at present who are concerned about a correction and wish to hedge the long spot currency position.

Well the hedger takes following positions constructs this strategy:

Write an OTM call option + hold an ITM put option (near month Call & mid-month put).

Writing OTM calls may likely to fetch certain returns since any abrupt slumps in near future may be taken care by this instrument.

This helps as a means to hedge a long position in the underlying outrights by holding longs on protective put.

Thereby, any declines in this commodity would be taken care by ITM put options since the holder of the put option will have right to sell at predetermined strike price at expiry in case of American style options.