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Silver & Gold Prices Popping, but Not in the Clear Just Yet

Silver & Gold Prices Popping, but Not in the Clear Just Yet

2016-11-01 10:55:00
Paul Robinson, Strategist

What’s inside:

  • Silver prices break out from triangle formation
  • Running into the backside of January trend-line
  • Shorts are off the table for now, longs cautious into resistance

After nearly a month-long wait the price of silver is trying to make a break for it. In recent posts we have been discussing the triangle formation developing, expecting that it would lead to a continuation trade lower, but also noting that we need to see silver first step outside the pattern before drawing any concrete conclusions.

From Friday: “A topside breakout will be a more difficult proposition due to it going against the trend in place since summer and resistance up to just over 18”. That’s the scenario we are presented with, though.

The precious metal is currently pressing up against the backside of the broken January trend-line and above the 17.70/18 zone of resistance created by peaks in May of 2016 and this year. This increases the likelihood of the top-side breakout failing, but we can’t fight the move until it shows price action which suggests this will be the case. If silver can press on through and close above the Jan trend-line, the next area of good resistance comes in at the 8/29 low of 18.40. Beyond there we will need to turn to the 9/16 low at 18.67.

In the event we see a strong failure at resistance and back into the resistance zone created by way of peaks in May of 2015 and this year, then we will can consider the possibility of a failed pattern breakout and turn our attention lower. In this case, it will be prudent to wait for silver to break the underside trend-line of the triangle before looking to become aggressive with a short bias.

For now, a short bias is sidelined, while caution is warranted on longs into resistance. Traders who already have an existing long position, placing a stop below today’s low at 17.82 makes sense.

Silver: Daily

Silver & Gold Prices Popping, but Not in the Clear Just Yet

Created with Tradingview

Gold is making its way higher in the ascending channel we had penciled in as a possible bear flag. Like silver, gold is facing resistance already. Today’s lift is carrying the precious metal up towards the bottom-side t-line (~1285) of an old bull flag development from July to September. We'll want to watch and see how it handles this level of resistance. Buying into resistance is not 'our thing', but we'll need to see it turn lower off resistance, and preferably below the lower channel line, before becoming aggressive sellers.

Gold: Daily

Silver & Gold Prices Popping, but Not in the Clear Just Yet

Created with Tradingview

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---Written by Paul Robinson, Market Analyst

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