Silver has been trading in a choppy bearish mode since reaching 22.00 in February. Last week it cracked the previous low on the year of 18.69, but did find support here.
The daily chart shows that the 18.20-18.70 area represents a key year long support. Also price has not been below 18.20 since August 2010.
Traders appear to be respect this support area when it rallied above the 19.00 handle last week. However price remains sticky at 19.00, so we’ll have to see if the market can make another attempt off this price bottom, which we can see better on the 4H chart.
But before dissecting the bottom, let’s limit any bullish outlook to the 20.00-20.50 area, which has several resistance factors:
1) Falling Trendline.
2) 200-day and 100-day SMAs.
3) Previous resistance in May and April.
Taking a look at the 4H chart, how can one trade a bullish attempt?
It looks like traders are looking to put in a price bottom when price held above 18.90. On the other side, price held at 19.20 and a second attempt has failed to get through so far. A break below 18.90 puts the focus back toward the 18.60-18.70 area in the near-term. But let’s say price extends a bit higher during the 6/10 session.
Since we have some prevailing bearish bias in the 4H chart, expect a bearish attempt when the RSI is above 70, and price is testing the falling trendline, 200-4H SMA, maybe around 19.30.
Then if there is a bearish attempt see if it will stall above the 18.70 area, preferably above 19.00. The RSI should also not drop back below 40 if bullish momentum is to develop in the 4H time-frame. If the market does indeed establishing this higher support pivot, and is able to push above the resistance factors mentioned above, then the 20.00-20.50 area could be next.
While the downside might be currently protected by the 18.20 support. The upside is limited if the USD continues to strengthen off rate hike talk. For example, we found out today that the head of the St. Louis Fed, Bullard has the expectation of a rate hike for Q1 2015. This is earlier than most analysts and market watchers have projected.
Silver will need the pendulum to swing the other way to gain in price against the USD, especially for any outlook above the 20-20.50 area.
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