SILVER TODAY: Support found but it may need to consolidate further

Short Term:
Medium Term:
Long Term:
Resistances:
R1 17.24 Dec highs
R2 17.35 H&S neckline (broken at)
R3 17.73 38.2% Fibo (Jul-Dec sell-off)
R4 17.94 20 DMA
R5 18.20 DTL
R6 19.00 Nov highs
R7 20.13 Sep 6 peak
R8 21.13 High so far
R9 21.60 Jul 2014 peak
Support:
S1 17.94 20 DMA
S2 17.72 UTL
S3 17.43 Neckline
S4 17.05 50% Fibo
S5 16.72 61.8% fibo
S6 16.63 Jan 27 low
S7 15.63 Low so far
S8 15.44 Long-term UTL
S9 13.64 Dec low
Stochastics:Bearish
Legend:

DMA – daily moving average

Fibo – Fibonacci retracement line

H&S – head-and-shoulder pattern

RL – resistance line

U/DTL – up/downtrend line

 

Analysis

  • We said in our report of February 28 that prices had overcome the DTL but look overstretched so we are not surprised prices have corrected.
  • We remain bullish in the medium term; the inverse H&S pattern had a target of $18.95 per oz but prices have now fallen back through the neckline of that H&S pattern so the pattern has lost some of its influence.  
  • Overall, though, we see this pullback as being a counter-trend move within an bull run.
  • The stochastics had plunged but have now rebounded strongly.
  • We will now get a feel for how strong underlying sentiment is by seeing whether prices can move above the late-February high.

Other factors

The fact silver had managed to accelerate higher despite numerous headwinds was a sign of a robust market. But the ramp-up of expectations about a US rate rise earlier in the month weighed on prices. Ahead of the rate rise, fund longs continued to liquidate – they cut 10,762 contracts in the week to March 14 – but, with the rate rise now out of the way, the rally has resumed. 

We still feel that bullion will remain sought-after as a safe haven in the weeks ahead. This is especially the case while geopolitical uncertainties are growing – the UK is getting closer to Brexit, Greece faces debt repayment issues, elections loom in Europe and US President Donald Trump remains a wild card.

Conclusion

Prices have found support; a move up through the former neckline and the 20 DMA would be constructive. A weaker dollar should also help underpin prices but, if the dollar finds support, any rebound in the greenback would again become a headwind. Perhaps prices need to do more work consolidating this year’s gains before they have the strength to rally further.

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.
Kathleen Retourne

About Kathleen Retourne

Kathleen has been reporting on commodity markets since 2006. She joined FastMarkets in 2011 and has immersed herself into the metal industry, specialising in LME coverage. Follow her on twitter @kathretourne