The previous bullish harmonic pattern that we anticipated on Gold did not complete and it was one of the losing trades that occurred.
The bearish move seems to have given rise to an Elliot wave and let’s examine it on the Daily chart.
These longer term patterns tend to give us a larger picture and one can estimate which part of the wave we are in.
Let us start with the weekly time frame.
Referring to a previous post of 14th Dec’08 “Is price movement random?” we had seen the fib relations on the weekly Gold chart.
I am enclosing the same chart for reference

As of today, we can see that price did find resistance a Fib level of 78.6% and hence we can expect some down moves.

Going down to the Daily chart to examine the price action in detail, we can identify a Bullish Elliot wave. The corrective wave.4 seems to be in the process & we can expect some further down moves.

Looking at patterns within patterns, we can see that the corrective wave2 was also a bullish harmonic pattern - the Gartley.
Plus we had a bearish regular divergence at the end of wave.3.
Coming back to the Elliot wave, the thumb rule for the wave.4 is that it should never enter the territory of wave.1. We can thus take this level as a barrier zone and expect some support here.
If price finds support, then we can expect the last impulsive wave5 to form.
If price breaks this level to the downside, then it negates the Elliot wave and we can expect further down moves.

Let me repeat my “mantra” again.
We use the technical tools to give us the best probable trade. But we don’t try and predict the price action. We wait for price to confirm & then enter the trade.
In this case, the wave.5 of the Elliot wave will get confirmed only if price finds support at the designated levels.
So, we wait.

Speaking of Elliot waves, let us have a look at a perfect bullish Elliot wave on the AUD/USD 4hr.
It’s always easy to look back at the situation and say, ‘oh we had a nice setup’.
Let me clarify that this pattern was not traded but was identified by one of our members “Artur” and its worth looking at the way price respects the Fib ratios…which subsequently leads to a pattern being completed.
The chart says it all & I don’t think I need to add any comments for it.

Sunil.