Upside For Silver

Technicals | Oct 16 2019

Bottom Line 15/10/19

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels:  16.50 / 15.83 / 15.00
Resistance Levels: 18.81 / 19.75 / 21.66

Technical Discussion

Silver is used in all aspects of our lives, including its use in electronics, batteries, solar panels, medical devices, and nuclear reactors just to name a few. In strong economic times, Silver becomes heavily in demand and if economic growth does take hold over the coming years globally, then prices are likely to be well beyond where they presently sit. And then we have the precious metal definition within this commodity which will likely keep prices buoyed, especially if the U.S dollar’s recent move higher starts to stall at any stage. Mining costs for Silver producers have also plummeted over the past few years and already we are seeing big miners expanding and producing solid revenues as part of this low-cost environment. Pure Silver mining plays are also few and far between so something to keep in mind in relation to the supply / demand equation as well.

Reasons to be bullish above [US$/oz]16.50:
? 200 day moving average broken above and acting supportive
? old resistance circa 16.50 now acting as support
? upside impulsive price action dominating

We’ve labelled the 4th September high at 19.75 as a Wave-1 high yet it could also be defined as a Wave-A. Especially as Wave-A’s can also unfold as impulsive 5-wave patterns. For now it is neither here nor there as both labellings are calling for a similar move to the upside once the Wave-2 low confirms. We see scope for the Wave-2 to have locked in yet we still require price action to prove this as fact. An equality move north off the Wave-2 low that has potentially locked in at 16.94, targets 22.18. Yet if price extended strongly beyond here a bias will sit with the overall move off the May 2019 lows evolving as a larger 5-wave pattern.

If this proves to be the case then we will be looking for substantially higher. For now though we are simply sitting back to see if price can revert back to impulsive to the upside. The typical Wave-2 50.0% – 61.8% retracement zone measures in at 17.13 and 16.50 respectively, with the low point tagged at this juncture off the recent dip, tagging 16.94. So right in the pocket. Old resistance at 16.50 now needs to prove it has reverted to support. It is also worth noting that any swing to the downside from here to fully retest this line in the sand, is likely to be hit with some Type-A bullish divergence. So right here and now there does appear to be some underlying strength attached to the Silver price chart. Back to the drawing board below 16.50. 

Trading Strategy

Our early aggressive trade on the long side at 14.64 was stopped out recently at 18.13. Yet post the recent pullback into a zone of confluence, we have offered up another aggressive opportunity on the long side. Plus a more conservative recommendation. The former has triggered in between reviews at 17.74 with our stop at 16.90. The latter triggers at 18.82 with stops TBA. Lets see how they go. 

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena’s (see our disclaimer).

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