The market during the 12/9 session pared USD-strength. This in turn translated to some rallies in metals such as gold and silver.. We saw gold climb sharply above 1200 towards a key trendline coming down from July. Silver on the other hand, rallied above its falling trendline from July’s high of 21.57.
Breakout and Shift in Trend: As price pushes above 17.00, silver is signaling a shift away from the bearish outlook since July. Price is climbing back above the 50-day SMA, and the daily RSI is pushing above 60, showing some loss of bearish bias and momentum. The fact that price pushed above the late November high around 16.78 reflects the first higher high of significance since the downtrend started in July.
Resistance; pullback: The bullish outlook will first be challenged around the 17.80-18.00 area, which represents October’s high, and a previous pivot as well as the 100-day SMA. Note that just above this area, at 18.11, there is the 50% retracement of the July-December down swing. We can expect some resistance here. Then, the subsequent bearish attempt can provide some interesting clues.
If the pullback can hold above 16.50, the bullish outlook should still be in play. A break below 16.00 might indicate that price is forming a sideways market above the current low on the year at 14.65. So, our bearish outlook should be limited to the 14.65-15.00 area.
19.00 is Next Key Level: If price holds above 16.50, there is still upside risk towards the 19.00 handle, which is where the 200-day SMA resides. Also, note that 61.8% retracement is just under 19.00, at 18.93. If we see price stall around 19.00, and the RSI is overbought, or even better, showing bearish divergence, we should anticipate a bearish attempt towards the 16.50-17.00 area, which represents a key support/resistance pivot in the formation of November-December’s price bottom.
False Breakout Scenario: The 4H chart shows the details of the breakout. If the sharp bullish swing is reversed, and price falls back below 16.15 (breaking below the cluster of SMAs and a support pivot), we might have to consider the 12/9 session breakout as a false breakout, which has a good chance of turning into a bearish outlook.
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