Hello. Welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Technical Analyst for City Index. Welcome back to another educational lesson on how to use technical analysis and chart patterns.

Over the last few weeks I've had quite a few enquiries asking how we can apply what we've learnt in the past to the current markets and that's exactly what we've been doing. We've doing market reviews and of course, taking a look at putting this into practical application. But as always, this is simply for information and educational purposes only. It is not to be taken for advice.

So we'll take a look at using the educational lessons and applying it to the current markets and today we're going to take a look at gold because obviously that's quite a popular market for many traders as well.

So, we want to understand current price action, what the markets are actually telling us and I'm going to use candlestick patterns and of course we want to trade with the market trend.

So here is the gold weekly chart and I've discussed this before in a previous lesson. I've pointed out the key levels on gold and there is no difference here really. The same levels are still there, but of course these moved away from the $1,266 to the lower side. So the first thing you want to do is actually mark off all the highs and lows on your charts because that's going to give you potential support and the resistance levels.

If I move onto this slide over here we can see that towards the right hand side of the chart the candlesticks told us that we actually had a hanging man and that was a potential reversal signal telling us that the market could start to decline and as you can see on the price of gold, especially on the weekly chart, we've seen a move towards the downside.

So what's actually going to happen after we see this hanging man pattern? What is the next thing that we look for? Well what I've done over here is I've moved to the daily chart. So we've got the overall trend from the weekly chart and on the daily chart, I've again marked off the highs and lows and it's only slightly different to the weekly ones because it's quite noisy on a daily chart compared to the weekly chart, but straight away we can see that $1,254 was broken, then we had a high of $1,266 and then, just after the high of $1,266, we started a break below the $1,198 area. But what was really interesting is that we had a bear flag forming and the high came in at $1,266 and the low at $1,185. Now if a bear flag is forming it's telling us there's a potential move towards the downside. So we had a candlestick pattern on the weekly chart and on the next timeframe, which is a daily chart, we have a bearish flag. So that's telling us that maybe gold is, at least for the short to intermediate term, looking quite bearish as indicated by the charts of course.

So we've broken again below $1,185. Now if we keep repeating this pattern, that's going to tell us that we've got lower highs and lower lows, confirming that there is a move towards the downside, or maybe it's just a correction to the large degree trend.

So what other information do we have? Now, as you guessed quite rightly, we have the $1,200 level and the $1,150. What are these? These are the psychological numbers and the round numbers we have talked about. So as you can see, gold has been trading right now below the $1,200 level so that's also indicating further bearish aspects to this current move.

Now of course, if you're a short-term trader you can trade around the $1,200 as long as you've got potential buy and sell signals there. But as far as I'm concerned, we had a consolidation, the move was going towards the downside, I'd look for a break below the $1,200 and especially below the $1,185 level.

So what is our target towards the downside? Well $1,150 is the next potential psychological number and then followed by that we have the $1,100. Now if you're short term traders you can use the intermediate numbers as well, which is $1,175, $1,150, $1,125, $1,100. But let's say for example right now we're focusing on the $1,150, another tool which you can use is take the high from $1,266 to $1,185. Markets often move in symmetrical moves. We could possibly see a move of a similar distance taken that move from $1,266 to $1,185 and then project that from $1,266 and we could come down to the $1,150 or slightly below that area there.

So there is some positive bearish aspects to what we're seeing in the move of gold right now.

Now if we add some indicators, it's revealing some more information. Straight away we can see that the parabolic SAR had been broken, gold had moved below the 20 day moving average, so there is no prize for guessing here, this does look quite bearish at least for the short-term. So as long as gold is below the 20 day moving average, below the parabolic SAR, trading below the $1,200 level, look for potential moves towards the $1,150 area, or if the market is going to change direction, look for a potential reversal on the candlesticks pattern.

So always observe or focus on the key price action. What is the market telling you by price alone and then use multiple timeframes for trend and entry. Of course, we want to pay attention to the key support and resistance levels and the round numbers and the psychological numbers and the parabolic SAR, in my view, is a very good tool for confirming the trend.

Well I hope this lesson has been useful to you in analysing the current moves in gold. I look forward to seeing you in the next lesson. In the meantime, have a great trading week.