Silver Price Down, But Is It Out?
- Silver prices continue to get routed, making a clean break of the March low
- Oversold, could continue to become more oversold, however; risk/reward for fresh shorts unfavorable
- Looking to resistance levels or consolidation of losses as next opportunity to join a move towards the December low (or worse)
The other day we had this to say about the rout in silver prices: “A string of losses, or gains for that matter, is not an indication a run must end, nor does the magnitude of a price move act as a great signpost (silver has dropped over 10% the past 2+ weeks). But it does provide caution for those looking to chase the market lower, or those who want to protect profits.”
Perhaps in this unusual instance short-term ‘chasers’ were able to benefit from additional short-sales. But it would seem likely the most recent losses will be erased on a bounce; the past couple of days had that short-term ‘capitulatory’ feel to it. All metals, precious and industrial, have been receiving a lot of attention in the media for their recent swoon. Oil, too. We may be at an inflection with commodities which will lead to an oversold bounce, and nothing more. A view expressed the other day.
The lower-low beneath the March low makes ~16.84 our first spot of interest as resistance. Looking beyond there the July trend-line could come into play, but could be losing its influence. The broken January trend-line looks like a more reliable source of resistance. It’s possible we don’t see a sharp snap-back, silver just wobbles for a bit working off oversold conditions through time and not price. In this case, a bearish pattern of shorts could develop – triangle, bear-flag, etc – and we can work with that instead of looking to rejections from overhead levels. It’s a wait-and-see game from where we sit before looking to join any more weakness to the downside. If you’ve been short, perhaps a trailing stop would be fitting to protect profits.
In any event, whether there is a big bounce or a sideways meander, silver looks headed towards the December low at 15.65 (or worse); path to be determined. It’s all together possible it continues to v-line lower and hit the late-2016 low in the near future, but risk/reward for shorts at this juncture isn’t particularly attractive.
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---Written by Paul Robinson, Market Analyst
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