Silver: The Trend Is Bullish But Also Overbought
- The trend is bullish, but the price is overbought, which may discourage fresh long positions.
- There are no market moving events on deck today.
On Friday I said ‘a break to the upper barrier at $15.60, may lift price to the February 12 high of $15.82’ something which has subsequently occurred.
Today, the short-term trend remains bullish and we may see even higher prices in the days ahead. However, with price being overbought and near to last week’s high of $15.82 the risk/reward ratio does not favor fresh long positions at current levels. A pullback to the $15.09 to $15.36 range, which constitutes a 38.2% to 61.8% correction of the rally from the February 29 low of $14.64, may tilt the risk/reward ratio in favor of new bullish positions. Please see chart below.
I will treat the trend as bullish as long as price trades above the February 3 low of $14.87.
The alternative scenario is a break to last week’s high of $15.82 and it is here that silver may reach its 2016 high of $15.97, with a break to this level open for a push towards the October 15 high of $16.23.
FXCM’s crowd positing indicator (SSI) shows that 73% of traders are currently net-short gold and therefore the projection is that there will be higher gold prices in the coming days ahead. Given silver’s strong correlation to gold, this may suggest that silver prices are also headed higher.
There are no market moving events on deck today.
Silver Prices | FXCM: XAG/USD
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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