Technical Sentiment: Bearish
Key Takeaways
Last week Silver tested the support trendline dating back to June 2013 and immediately went on a 97 cents rally, forming a bullish engulfing bar on the daily chart. As traders preferred to take profit rather than follow through with the bullish signal, silver slipped back into a bearish lower low – lower high configuration on the hourly timeframe. If the $19.30 support level holds, buying momentum might pick in the coming sessions.
Technical Analysis
The double test of the 61.8% Fibonacci retracement level between $18.93 and $19.90 is a small clue that Silver might have completed the pull-back on last week’s rally. Price remains below the main moving averages on all timeframes, with a bearish trend configuration of lower highs and lower lows trend, consequently there is always risk for more downside.
While the support at $19.30 holds, the first resistance is located around $19.53 (most recent lower high in the short term configuration and the 200 Simple Moving Average on 1H). A rally above $19.53 will open the way towards $19.90, and only on a break above this level will Silver completely switch to a technically bullish trend.
Stochastic is in oversold territory on 1H and 4H, bringing up the possibility that the bearish cycle is complete, yet price action has to confirm the reversal with more bullish bars.
If Silver clears below $19.30 and the previous two lows in the $19.22/24 area, the sell-off will continue in similar fashion towards $18.93 in order to test the major support once again.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets