Improved Situation with Gold & Silver. Price Action Lessons in GBP and JPY

Improved Situation with Gold & Silver. Price Action Lessons in GBP and JPY


So it worked, the forecasting of how the next day would look like in Gold (see previous week's post here). But this week it won't be that easy. The good news is that the situation in both Gold and Silver is improving with more things suggesting that the upside should be favoured. 

Silver analysis

Latest COT reports show a short-term COT pattern in Gold. Silver has the On Balance Volume supporting the up move (green line on the chart) because the accumulation measure is stronger than the chart itself. Both instruments will make a higher short-term low (essential for a good up move) if the price breaks above Friday's high.

In Silver, still a bit stronger than Gold, Friday, was a down Long Body. When backtested a simple signal, breaking above Friday's high on Monday, is making a small profit with a little bit more than 55% winning trades in the last 20 years. This is without any stops, targets or complex exit rules, just exiting on the closing price, no matter if it is profitable or not.

Of course, if such a signal happens the best stop would be below the LB's low while the target should be somewhere around 27.30. That is a little bit more than 1:1 Risk-Reward. If we see price action catalysts or Monday is an inside day that would make the signal stronger. Anyway, I intend to look for long signals this week.


Again the pound! After last week's brief move down now the British currency is again presenting a short opportunity.

British Pound vs US Dollar analysis

It begins with a short-term COT pattern, indicating a 70% chance for a decline this week. Next comes the On Balance Volume. During the previous signal there was not much of distribution but look at the indicator now (green line, on the chart). The divergence is clearly visible. While the price moved up, touching new highs, the indicator is showing no accumulation.

Now, about that up move. The currency made a new high, breaking above the prior top, but that lasted only a few minutes! If it was such a desired outcome with so many supporters why the price stood there only briefly and then collapsed? In my opinion that breakout entrapped many participants who thought that the trend will resume, providing enough volume to execute other big trades in the opposite direction.

That is supported by the bar we saw on Tuesday (highlighted on the chart). That was a bar of a considerable range, with the largest Open to Close we saw in months. It was also almost with No Tail and No Nose (we can label it as 0N for sure). From my experience, such bars allow significant distribution to happen and often are very close to the end of the movement.

After this special bar, a Long Tail appeared, to suggest a down move. There was no break of the 1xT's low instead the newly formed LB enjoyed the new highs for a brief moment and then on Friday the market broke below the 1xT's low. I am expecting this move down to continue and will be on a lookout for short signals.


Japanese Yen analysis

I am kind of puzzled here. The JPY has been in some strange bullish trend for almost a year, and now it retraced back to the rising trendline. Most important here is the bullish short-term COT pattern suggesting that somebody might buy higher prices here. From a price action perspective after a four-day correction, the market is now trying to make a higher short-term low. Which would happen if Thursday's high is breached.

As I see it, the better trade would be to the long side here. The upside seems bigger than the downside. Most likely if lows and the trend line are penetrated we'll see a sideways movement.

Now, let's find your missing piece!

Vassil Banov,
Founder of Piece of Trading

Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer
Seasonal indicators courtesy of Larry Williams, Charts made with TradeStation®.

TAGS: British Pound, GBP, Japanese Yen, JPY, GBPUSD, USDJPY, Gold, Silver, Price Action Trading, Accumulation, Distribution, Talking Chart

Find this content helpful? Support our efforts by buying us a coffee!