Since reaching a new all-time high in 2020, the gold price entered a consolidation that turned into a slow descent. It currently evolves in a bearish channel, one that respects the rules of a bearish trend – lower lows and lower highs. As long as the price action remains within such parameters, both bears and bulls will try to push at the channel’s extremes, considering the end of the year trading.
With the fiscal stimulus approved in the United States and the Brexit deal imminent, there is little or no risk in the markets as Christmas and the end of the year holidays near. As such, traders may choose to trade ranges of a channel like the one below, with the downside favored for the simple reason that some investors may decide to book profits on long positions held over the year.
Bears may want to sell close to the upper edge of the channel with a target at the lower edge and booking partial profits when the price reaches the mid-channel line. On the other hand, bulls are expected to step in on the lower edge of the channel, with a similar strategy in place. Ideally, both bulls and bears should use an oscillator on the lower timeframes to identify overbought and oversold levels to trade the edges of this channel.