Today’s Trading Edge: Silver rallies above 200-day SMA

Weaker economic activity in the U.S. and growing expectations for the Federal Reserve to delay tightening has provided silver prices with a significant bullish move above the 200-day SMA. The current rally began off the August low of 13.91 and the current daily gain of 2.21% has the metal trading at 16.055.

Further upside may be upon us due to technical buying. The silver daily chart shows that price may find resistance from a bearish ABCD at the 16.10 level. Point D is targeted with the 161.8% Fibonacci expansion level of the B to C drop. The reversal pattern may be invalidated, because technical buying may remain strong and the reversal pattern typically does not like having a long-bodied candle to trigger the pattern.

If valid, we could see limited downside target the 15.50 region. Further weakness could target the 50-day SMA, which currently trades at the 14.855 level.

Silver prices may finally see a major bullish rally here and key upside resistance may come from the 17.775 level. Only a weekly close above here could open the door for a move towards psychological 20 handle.

The trade: Buy Silver at 15.50 with a stop loss at $14.50 and a take profit at $18.50 The Risk/Reward Ratio is almost 1: 3

 

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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