FxWirePro: Gold forms double top, break below trendline support and 50%. likely to drag slumps – Use short hedge with mid-month tenors

Gold price behavior has formed the double top pattern with top 1 at 1295.45 levels and top 2 at 1295.98 levels (refer daily charts).

Currently, this bearish pattern and bearish DMA crossover have caused the bears’ attempts to break below trendline support and earlier 50% Fibonacci retracements.

The current prices remain well below 21DMAs & EMAs, we, therefore, foresee more slumps likely upon shooting stars formation on both daily as well as weekly charts.

On the broader perspective, it seems that double top pattern has occurred on the weekly chart as well, now it seems like prices are tumbling to hit 3-months lows.

The upswings in consolidation phase have rejected at 1294.50 levels, consequently, tumbled and breached below 50% Fibonacci retracement levels. Expect more slumps upon breach below strong supports at 1250 levels.

Historically, shooting star also pops up at this same resistance levels and evidently rest is the history, in an interim uptrend, gold prices have almost retraced to the lows of 1259 from the recent highs of 1295 levels in the consolidation phase.

RSI and stochastic curves are converging to the price drops to strongly indicate the stern selling momentum.

While current prices on this timeframe have been sliding below DMAs, MACD on the other hand signals downswings are expected to extend.

Well, on hedging grounds, we would like to add shorts using futures contracts of mid-month tenors with a view to arresting downside risks. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

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