Silver looking toppy as risk events near

28 авг.

Silver’s been on a nice run recently, benefitting from an easing of concerns towards the trajectory for US economy. That’s because unlike gold which has been heavily influenced by movements in the US dollar and bond yields, silver has been extremely correlated with copper futures over the past month, another industrial metal closely tied to economic activity.

While concerns have eased recently, we’re about to receive a whole bunch of economic data that could easily see them flare again next week. Perhaps unsurprisingly, silver has struggled to extend the bullish reversal sparked by Jerome Powell’s speech last Friday, wobbling ahead of downtrend resistance dating back to the highs struck this year.

When you look back to see how the silver price has interacted with this level previously, you can’t help but notice it’s littered with evening stars, bearish engulfing candles and key reversals, all notable topping patterns. It doesn’t like it.

With RSI (14) rolling over, warning of waning bullish momentum, I wonder whether we may see a similar outcome soon? Wednesday’s candle, while incomplete, looms as a potential bearish engulfing, while the price is threatening to break out of the rising wedge it’s been in for several weeks.

For those keen to take on the short trade, you could sell now with a stop above Monday’s high for protection. The initial trade target would be $28.77, conditional on the price being able to break the 50-day moving average. If $28.77 were to give way, $28.046 and $27.269 are the next levels to consider. If the trade moves in your favour, consider lowering your stop to entry level or below.

Good luck!
DS