What’s inside:
- Silver prices continue precipitous decline, making fresh shorts dangerous, longs without reason
- A bounce to alleviate oversold conditions into resistance ideal for new short positions
- Bias is towards seeing the December low at 15.64 or worse
Silver and gold both getting hammered, see what’s driving the precious metals market in the quarterly forecasts.
For starters, and I’m certain we aren’t alone here, but the move in silver prices has been far more persistent than anticipated. In recent posts, we’ve been looking for a bounce, not a bounce to buy but to join the trend lower once price action at resistance indicated it wise to do such. Not only have resistance levels gone untested, but one level of support after another has been undercut with buyers only showing up momentarily on an intra-day basis – and that’s it.
When will the rout end? At this time, it’s looking like the next spot of potential interest won’t arrive until the December low at 15.64. Looking out a bit, if things get really nasty it’s possible we don’t see relief until the trend-line from 2003 to current. But that’s not until around 14.80. This trend-line was discussed in one of the ‘Top Trading Opportunities in 2017’.
If risk/reward is unfavorable to short right here and there isn’t support and price action indicating a good buying opportunity is likely to develop, what is a trader to do? For holders of profitable short positions, implementing a trailing stop is a prudent approach. Buying falling knives isn't our forte. If flat, then be patient. Chasing here is dangerous. Waiting for a relief bounce to fail at resistance is the preferred approach on this end. There are a couple of points of interest, with the first arriving on a retest of the broken trend-line running up from January 2016. The second area of resistance comes in at the March low around 16.84 which, depending on the timing, may coincide with a test of the July trend-line (a t-line we may soon put to rest if the market stops reacting to it.)
We may or may not see a bounce for would-be shorts get to involved, but keeping disciplined here and not chasing is important. Sharp declines like this can suddenly turn as the market becomes saturated with sellers. Silver looks headed towards the December low (or worse) soon, it’s just a function of getting a position on with good risk/reward. Should the drop continue on down to the December low and a strong reaction develops, we may even look to flip the script and play an oversold bounce if price action is ‘acting right’.
Silver: Daily
Created with TradingView
Paul conducts webinars every week from Tuesday-Friday. See the Webinar Calendar for details, and the full line-up of all upcoming live events.
---Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.
