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Silver Prices: Replay of Last Week, or Turnaround on the Way?

Silver Prices: Replay of Last Week, or Turnaround on the Way?

2016-11-29 11:19:00
Paul Robinson, Strategist
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What’s inside:

  • Silver puts in another key reversal day in direction of trend
  • Support/target in the 16/15.80 zone yet to be met
  • Possible bullish scenario, but will run with the bears until proven otherwise

The price of silver neared our target zone last week, but found buyers before it could reach the 16/15.80 zone. Prior to the thrust which nearly took it to target, this is what we had to say: “(Silver) put in a bearish reversal bar, which leads us to conclude that we should soon see another downdraft…”

Are we in for a replay of last week? Yesterday, silver attempted to rally, but stalled and dropped to close out the day with only a small gain and another key reversal day. Unsurprisingly, the US dollar played out similarly but in reverse; the 21-day correlation between silver and the currency is -95%, a nearly one-to-one inverse relationship.

Silver: Daily

Silver Prices: Replay of Last Week, or Turnaround on the Way?

Created with Tradingview

We have a potential battle of technical events on our hands. The downward trend coupled with the bearish reversal day suggests another round of selling is around the corner. However, silver, and the dollar in inverse fashion, are carving out ‘head-and-shoulders’ formations on the intra-day time-frames. It’s possible since 11/18 that silver is putting in a bottom, which may help lift it higher, while the dollar retreats.

60-minute (w/USD)

Silver Prices: Replay of Last Week, or Turnaround on the Way?

Created with Tradingview

Which scenario do we go with?

First things first: A ‘head-and-shoulders’ pattern is not valid until the ‘neckline’ is broken. In this case, silver needs to rally above the 'neckline' and 16.86 (yesterday’s high) with conviction. At this time, the metal is still working on carving out a ‘right shoulder’, so the formation still needs time before becoming a more serious consideration. The reversal day in the direction of the trend coupled with the fact support in the 16/15.80 zone has yet to be met, leads us to remain in the bear camp until proven wrong. A 'neckline' break would be proof. We would then want to keep an eye on price action heading into the low 17s along with the dollar.

Join me tomorrow (11/30) at 10 GMT for a discussion regarding the US dollar and commodities. For a full schedule of live events, please see our webinar calendar.

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.

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