So last session gold tanked off the back of comments from the US Fed.
The large ‘waterfall’ drop has created a situation where price as moved to extreme distances from the mean value – (I use the 10 & 20 Daily EMAs).
This occurs when price moves very fast, like when you see really large candles. Generally when price launches away from the mean and creates these gaps, I look for mean reversion opportunities, which is basically a equally aggressive move back to the mean.
The 4 hour chart of Gold clearly shows the large gap here, so I am looking for an opportunity to buy.
It’s possible to just ‘blind buy’ it, but I like to use reversal signals – and right now we have a bullish reversal candle signaling a potential mean reversion.
If this reversal signal kick off a bullish mean reversion, there is a lot of reward potential here, if it doesn’t, well it’s simply a stop out.
Lets see how this setups unfolds – we’re most likely to see progress in the US session when the gold market fires up.
Mario
and I am seeing a false breakout & reversal setup forming on H4 Chart..