FxWirePro: Gold bulls break out sloping channel resistance in minor trend, bears reject at rising wedge resistance major trend – Trade straddles and long hedge

The minor trend of the yellow metal price has been sliding through sloping channel pattern.

On intraday plotting, the interim bulls have managed to break-out channel resistance convincingly and spike off above 21DMAs where both leading oscillators (RSI and stochastic curves) converge upwards along with the upswings that indicate the strength and the ongoing bullish momentum.

For now, more rallies seem to be on cards as the MACD shows bullish crossovers to signal extension of the further upswings.

On the contrary, the failure swings at wedge resistance evidence price slumps, the intermediate trend extends rising wedge as current price drifts back below 21EMAs (refer weekly chart).

Shooting star pattern has occurred at the peaks of the rallies signals bearish strength.

While both leading oscillators (RSI & stochastic curves) on this timeframe shows downward convergence to the price dips to indicate the bearish strength. But the same has not been confirmed by the trend indicators.

Trade tips:

Well, with a view to suit delta risk reversals and 1m skews, diagonal straddles are advocated.

The strategy can be executed as follows using at the money delta call options with far month expiry while holding near-month at the money put options.

This ATM contract along with prevailing upswings would indeed turn into in the money sooner or later within expiry. By then, XAUUSD may test upper channel line pondering leading oscillators on weekly to hit overbought territory.

We could foresee the upside risks going forward contemplating risk reversals and positively skewed implied volatilities.

Hence, with a view to arresting upside risks, it is wise to deploy long hedges by entering into 3m (1%) ITM call options on hedging grounds.

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