Silver Prices: Game of Ping Pong in Progress
- Silver bouncing between support and resistance
- A positive development as long support is held
- A breakdown below support and top of triangle would be not be good for longs
In yesterday’s post, we were discussing the reversal in silver prices off resistance post-FOMC, and the need to hold above 18 for longs to stay out of trouble (yesterday’s LOD was 18.01). Silver is currently playing a game of ping pong between support and resistance. This could be a good thing for the long-side of the tape, as a consolidation after a surge out of a pattern can set the market up for another launch higher.
Support comes in by way of the recaptured January trend-line and support zone running back well over a year. A break of 18 will quickly expose the upper part of the October triangle in the 17.70s. This would still be viewed as support, but the fact silver will then be back below the Jan trend-line and still in a downtrend since July would be concerning. So, its best the metal continues to hold onto the trend-line and stay above 18 if it is to take another ride higher.
A break back below trend-line support, 18, and through the triangle would be considered a major failure. At that point the 10/6 low at 17.11 will quickly come under fire. We’ll discuss what we view would happen from there should that scenario present itself.
For now, our interest lies in seeing if support can hold and whether a continuation set-up can develop in the days ahead.
Levels to watch: Resistance at 18.40 (August low, still haven’t closed strongly above), 18.64 (11/3), 18.74 (11/2), and beyond there silver has room to run towards the July trend-line (>19). Support comes in at 18.16 (today's low), 18.01 (11/3), then 17.70s (October triangle.)
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Data heads up: It’s NFP Friday. The market is looking for a print of 175k and the unemployment rate to tick lower to 4.9% from 5%. Wage inflation via average hourly earnings will be of interest, currently at 2.6% YoY. The reaction in silver will be based primarily on the headline NFP figure. It will likely require a substantial deviation from NFP expectations to cause a sharp sustainable move, +/- 50k or more.
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---Written by Paul Robinson, Market Analyst
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