Silver’s Downtrend To Resume; Near-Term Reversal Imminent
Blackwell Global | Jan 16, 2017 05:23
Key Points:
- Long-term bearish channel remains in play.
- 100 day EMA likely to reinforce the upside constraint to prevent a breakout.
- Long-term fundamental bias relatively bearish.
Silver continues to navigate its bearish channel lower which could be portentous of yet another large slip for the metal. However, there is also scope for a little more upside potential in the near-term which means the likely reversal is still a number of sessions away from materialising.
Taking a look at the daily chart, the well-tested bearish channel is quite clearly still in place and silver is beginning to inch closer to the upside constraint. However, due to the general shift in sentiment back towards both gold and silver, some might question if the structure can weather yet another attempt at a breakout. Fortunately, albeit only for the bears, the evidence still seems to suggest that even with its increased uptick in popularity, silver prices should reverse relatively shortly.
Specifically, despite the bullish EMA crossover, the ADX readings are actually in decline and are now very much in the weak or no trend range. As a result, prospects of extending the recent uptrend past the upside constraint of the channel are fairly slim, especially given the influence of the encroaching 100 day moving average. Even more damningly, the stochastics are deep in overbought territory which will certainly be starting to limit gains and encourage a reversal within the next week or so.
From a fundamental perspective, one can’t ignore the ongoing effects of increased expectations of rate hikes throughout 2017. Indeed, the relatively consistent reminders from various FOMC members about the accelerated schedule of FFR increases are already giving silver bulls pause for thought. Moreover, the Fed’s general rhetoric and stated opposition to Trump’s inflationary policies should counteract much of the headline risks posed by a Trump presidency.
Ultimately, these fundamental factors provide fertile ground for further slides in silver prices which could make the current downtrend a long one. As for what this means in the near-term, they make chances of an upside breakout fairly remote and this leaves the metal with little choice where to go but down. Presently, losses should be capped by around the 15.97 mark which would fall in line with the 78.6% Fibonacci level. However, given the strength of some of the recent slips, we could even see the lows of early 2016 retested by mid-February or early March.
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.