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Silver Tech Update: Two Short-term Scenarios Coming into View

Silver Tech Update: Two Short-term Scenarios Coming into View

2016-07-13 11:36:00
Paul Robinson, Strategist
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What’s inside:

  • Silver prices continue to digest gains, but…
  • A continuation-style H&S or ascending wedge formation could bring clarity
  • A little more time needed for either to confirm

Since yesterday’s commentary not a whole lot has changed in silver. The market is still digesting the late July/early July run-up. It is continuing to consolidate with a couple of possibities taking shape which were not noted yesterday.

On the 2-hour chart we can see a continuation-style inverse head-and-shoulders formation taking shape. This would suggest a run higher towards the 7/4 high at 21.11, and higher should we see a breakout. The nature and depth of the pattern suggests the latter, with a target of approximately 21.80; which happens to sit between peaks set in February and July of 2014.

Continuation-style H&S formations tend to proceed a meaningful turning point once the thrust higher runs out of steam. If we get a confirmed breakout from this pattern it should result in an 'end move'.

This behavior would be consistent with what we have been noting previously regarding sudden and extremely large thrusts higher, and the tendency for the market to continue upward in the short-term as buyers fully exhaust themselves before reversing lower thereafter. For more, check out this commentary.

A strong break above the neckline at ~20.80 (dotted red line) should kick off a move to 21.11+. On a breakout to a new high, then we need to go back to July and February of 2014 to find resistance at 21.56 and 22.16, respectively.

A clear break below the trend-line off the 7/8 swing low and yesterday’s low at 19.87 will undermine this bullish stance and the potential for the alternate scenario.

An alternate path under consideration is the development of an ascending wedge, which requires a bit more hemming and hawing with an upward tilt before eventually breaking out in either direction.

Silver (XAGUSD) 2-hr

Silver Tech Update: Two Short-term Scenarios Coming into View

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

You can email Paul at instructor@dailyfx.com.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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