The price of silver has been trending lower and has now after reaching the low of 14.15 reacted strongly higher over the last three months. This rally was stopped by a resistance at 18.62 and price has since moved lower to 16.55 where it created a weekly pivot. All in all the price is trending lower in a wide trend channel and is now close to a midrange between the latest weekly pivot high of 18.50 and 14.15 low. However, if the Gold finds support from the potential bottoming area (see my previous analysis on Gold), then it is safe to assume that highly correlated Silver is also a long term buy. Silver is now close to a similar region as Gold, where price is trading just above levels that used to resist price moves higher. This suggests that the downside relative to weekly price swings is getting limited.
Silver, Daily:
Silver has now broken a recent uptrend and created a lower high at the trend line. It is now moving sideways between the trendline and a support at 16.55. The daily pivot high from February 3rd limited the upside and has turned price lower today. The price of Silver is currently close to the daily range low and at a level that coincides with the 38.2% Fibonacci level. The 50% level is in the region of the lower Bollinger bands. Should the current levels break, the next potential support levels are in the region of 15.50 to 15.80 (support level and the 61.8% Fibonacci level).
Silver, 240 min:
In the 4h time frame the price is in a sideways range and has moved close to the lower end of it. The Stochastics are oversold and price is getting close to the Bollinger bands.
Conclusion:
As we have a strong weekly resistance area above and a weekly pivot below it is likely that the price will remain range bound between 15.50 and 18.60 over the coming weeks. These levels are approximations as support and resistance levels are never exact but rather areas around the resistance levels. The lower high and low in the daily chart suggest that price might correct lower from here. Should this happen the 61.8% Fibonacci level at 15.83 and the daily support at 15.53 would be potential downside targets. The latter coincides with the weekly 1.5 standard deviation Bollinger band and is therefore likely to be a level with added significance. The price of Silver has a high correlation with the price of Gold and should my long term Gold analysis prove correct (expecting Gold to find support from the potential bottoming formation) then Silver should also be a long term buy at levels relative close to the current prices. It is worth keeping an eye on both and see how they react in weekly, daily and 4h time frames. You can access my latest Gold analysis here.
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Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.