Silver Technical Analysis – XAG at Risk of Breaking Long-term Support
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Silver Technical Analysis:
- Testing major support back to September 2020
- If 21.42 is firmly cleared then a broader move lower could unfold
- For now, support is support until it isn’t
Silver has been weak, and broadly speaking it has been quite a bit weaker than its big brother gold. Yesterday’s sell-off from a small congestion pattern has silver even more firmly probing major long-term support.
The area from around 22.46 down to 21.42 has been meaningful since September of last year. We have seen a few sizable rallies develop from this zone of support, keeping the nearly 17 month-long sideways range intact.
Support is support until it’s not, and on that it should continue to be respected. It does look like it is going to break, but then again it appeared similar in September when momentum was fiercely negative. If a sharp reversal develops soon, then the outlook could turn positive in the short to intermediate-term for continued range activity.
If we see a firm close below 21.42, especially on a weekly basis (which could happen today), then while it could be a false break we will have to seriously consider that the bout of weakness recently will continue for the foreseeable future. The 2019 high at 19.65 will be the next major stop to watch.
From a tactical standpoint, existing shorts may want to give silver some room here to see if it can’t break major support. It could provide an opportunity to extend an already good trade. If a reversal happens, then buttoning up on trailing stops may be prudent.
For would-be shorts, a break and then failure to rally back immediately may offer a nice set-up from a risk/reward perspective. Would-be longs will likely be best served waiting for a strong reaction higher off support before initiating bullish wagers.
For now, staying the course with a bullish outlook.
For the full set of details, please check out the video above…
Silver Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.