FOREX INDICATOR: CONFLUENCES

Technical Confluences Indicator

Gold: Sell the bounce as Trump raises doubts about ‘peaceful transition’

Gold (XAU/USD) remains under pressure on Wednesday, having faced rejection once again at $1900. The first US Presidential election debate was chaos and weighed on the market mood, which helped the safe-haven US dollar recover from weekly lows. US President Donald Trump warned of a delay in the election and the eventual 'peaceful transition'. Meanwhile, the odds of Joe Biden winning propped up, which didn’t go down too well with the investors.

Attention returns to the US fiscal stimulus and a raft of key economic releases, including the critical US employment and GDP. How is gold positioned technically?

Following the latest leg down, the Technical Confluences Indicator shows that Gold is trying hard to recapture a dense cluster of resistance levels between $1890/92, which is the convergence of the Bollinger Band one-hour Middle, SMA50 and 5 on four-hour.

The next relevant barrier is placed at $1894, the Fibonacci 23.6% one-day. A break above the latter could trigger a minor rally towards the previous day high at $1899.

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What are the Technical Confluences?

The TCI (Technical Confluences Indicator) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.

HOW TO READ THE CHART?

Confluence of technical levels

This tool assigns a certain amount of “weight” to each indicator, and this “weight” can influence adjacents price levels. This means that one price level without any indicator or moving average but under the influence of two “strongly weighted” levels accumulate more resistance than their neighbours. In these cases, the tool signals resistance in apparently empty areas.

Color code

The tool detects and draws those price levels in which the confluences of indicators and key levels are recorded. Blank lines represent areas where the price can move without technical resistance. The levels with the highest assigned weight of resistance are drawn with the darker colour, this colour being degraded as the influence of the maximum levels decreases.

Tooltip

You can see which indicators are within each price level by placing the cursor on the level. The explanation uses a code that indicates:

Recent maximums and minimums
Round numbers. Round numbers have a psychological effect on traders, so we assign the finished price levels at 0, 00 and 000 some degree of resistance.
Short-term highs and lows
Pivot Points
Moving averages
Bollinger bands
Fibonacci retracements

HOW TO USE IT?

With the TCI tool, you can easily locate areas where the price can find a support zone or resistance zone and make trading decisions. If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points each time. If you are a medium- and long-term trader, this tool will allow you to know in advance the price levels in which a medium / long-term trend can stop your travel and rest, where to undo positions or where to increase your position.

Bars’ length

The length of the bars of the TCI tool is determined by the weight assigned by the algorithm at each price level. The longest bar in a confluence indicates the level of the price segment where the highest level of confluence of the segment is located. In case of similar levels in the same price range, the maximum length will be assigned to that bar with more accumulated indicators.