Putting short-term and long-term charts in perspective

 

 

Did you ever encounter different views on a different time-frames? Showing you a different picture. What to choose for trading? What strategy? That is where your sense of trend direction kicks in. What do we have looking at the Gold charts now?

Looking at the monthly chart above we can see that the instrument made a previous monthly break below the uptrend Pitchfork channel 1300 level and has completely erased gains from a previous two years of an uptrend continuation. With this break, Gold is heading to a monthly horizontal downside resistance and also the 200 SMA 1107 level. The one thing from this timeframe should be clear for you, as long as the instrument is below the 1237 level the only way you should look is downside and $100 downside.

For some traders which are not using the top-down trading analysis, the problem is arising when they look at the weekly chart and they are intrigued by the latest bounce off the 1170 horizontal level resistance which is also a Fibonacci retracement 76.4% of the 2016-2017 swing up. Some see this as a bottom for an uptrend continuation. However, there is no uptrend, it is broken. The instrument is below the SMA’s on a Monthly, Weekly, Daily timeframe. Short-term bounces like this could only be used for a swing trading and only in the case of a daily close above the 1232 level.  Target should be in the 1270-1280 zone but the risk to reward for this kind of longs are poor.

A Daily chart is revealing the 34,55 WMA (weighted moving average) downside support and traders looking for the long trades here, and they are not already long from the 1160 level, need to wait for the break above the 1234 level for a higher probability entry. On the other hand, traders looking for short trades, within an overall trend have a much better risk to reward entry. The stop loss should be just above the 1235 and the target is 1160 level.

The main conclusion of this technical analysis insight, is that when you have two opposing views on a difefrent timeframes, look at the possible risk to reward for the trade entries to be taken. Wher the risk to reward is better, and it is usually within the overall trend, go for that directional trade.

 

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