XAUUSD has been moving in an ascending channel in its 120 min chart after hitting the lowe of the descending channel on May 27. Today's action made an evening star formation at the top of this tight ascending channel and is now bouncing off of the lower edge, and also of the mid-Bollinger line. The short-term, and also the long-term trends are ascending, thus making possible an entry on the pullback. If the current candle pictures a large lower wick and the pierces through the $1,735 line it may trigger a buy order, with a target at $1,753 top. Our invalidation level is set below the low of the large bullish candle made on May 31. The reward/risk ratio of this play is 2.57, which is excellent, and will help traders to be profitable long term. Conservative traders may wait for XAU price to move above the previous open ($1,736.82) giving up a bit of profit and reward/risk factor for a bit more confirmation.
The main levels of this setup are:
Long Entry level: 1,735.3
Invalidation level: 1828.65
Take-profit level: 1753
Reward/Risk Ratio: 2.57
Dollar risk: $700 for one lot, $7 for 0.01 lot. (1 micro-lot)
Dollar reward: $1,800 for one lot, $18 for 0.01 lot (1 micro-lot)