- Silver adding to recent gains in line with historical momentum extremes
- Pullback risk has become elevated, choppy trade could evolve
- Support levels offer potential spots to reload
The surge in silver prices continued yesterday as near-term momentum continued after the initial rally on last Friday’s awful NFPs. In our Thursday commentary we noted the strong upward momentum ranking high amongst other rallies in recent years, and given its strength we expected further short-term gains, even if those gains were to come in a choppy fashion. The chop has yet to begin, but a pullback (perhaps the beginning of some chop) is not to be unexpected at this juncture.
Silver is finding good resistance around the 17.31 level we had penciled in, so we will work with that as the first hurdle to overcome. Around 17.55 is the next top-side level to worry about, and then if things get really out of hand in the short-term we have the April peak at 18 (17.99 if you are counting pennies).
At this time, we will wait for a pullback to develop and see how the market reacts to it before making further assessments. Risk of a pullback has become quite elevated, and while chasing momentum might be tempting, the reward is not likely to outweigh the risk.
A decline back towards the 16.70/17 area would offer a spot for silver to reload for another drive higher. This zone represents solid support from April and May, while right around 17 itself is the upper parallel from the beginning of June.
A drop below 16.70 would clearly undermine current momentum and alternate paths would need to be considered.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX, and/or email him at firstname.lastname@example.org.