What's already happened on the daily chart
On the daily chart, gold broke a long-term downward trendline. This is the first of three events I'm watching for under Sperandeo's method, and on its own it doesn't decide anything yet: a broken line is a bid for a trend change, not the trend change itself.
Right now the price is , and for the past few weeks the market has been ranging between and . In other words, after the breakout we didn't rocket upward - we settled into a wide corridor spanning almost $470. That's a normal picture for a moment when the old trend has broken down but a new one hasn't formed yet.
Why I'm reading this through Sperandeo
The method is simple, and it works reasonably well on gold: first a trendline break, then a return to it and a test from below, then a breakout of the prior high. Only the third event turns the break into a genuine new trend.
The logic is that testing the broken line checks who now controls the level. If sellers can't push price back under the line, and buyers then take out the old high, the market structure changes completely: the old resistance becomes support, the high gets taken out, and from there the advance runs on its own fuel rather than as a bounce inside a downtrend.
For me, the key thing here is the sequence itself. I don't see the point in skipping steps and jumping in on the trendline break alone.
What I'm watching for at these levels
The upper boundary of the current range is . That's the high whose breakout completes the third step of the pattern and confirms a new long-term uptrend is forming.
While price stays below that, I'm waiting for the second step to play out: a pullback to the broken trendline and a reaction from it. A solid reaction from below is what gives grounds to trade the upside scenario. A poor reaction - meaning a slide back under the line - pushes the whole setup back.
The lower reference point of the range is . A move down there, and especially a close below it, breaks the picture: the trendline break then turns out to be false, and the market stays in its old downward logic.
What would invalidate the idea
A return of price back under the broken downward trendline on the daily chart is the first signal the scenario isn't playing out. If the market then also drops below , I'll drop the upside idea and wait for a new picture to form.
Until then, everything happening between and is just the market working through step two of the pattern. Impatience here costs more than missing the first hundred dollars of the move.
In short
- Gold broke a long-term downward trendline on D1, the first step of the Sperandeo pattern
- Current price is , the market is holding within the - range
- Step two is a test of the broken line from below, which is what I'm watching for now
- A breakout above completes step three and confirms a new long-term uptrend
- A drop back under the trendline and a move below would invalidate the upside scenario