Technical analysis – Silver looking bearish heading towards 61.8% Fibonacci

Anthony Charalambous, XM Investment Research Desk

Silver sellers appear to be in control as the commodity is nearing the 16.32 barrier – that halted previous declines – which is the 61.8% Fibonacci retracement of the up leg from 14.28 to 19.63. The negative push seems to have backing from the downward sloping 50-day simple moving average (SMA) and the momentum indicators.

The MACD, in the negative zone, is declining below its red trigger line, while in the bearish region the RSI is heading for the 30 mark. Furthermore, the %K and %D lines of the stochastic oscillator are downward sloping and have room to move towards the oversold section, suggesting additional declines. That said, the SMAs warn of their intact neutral-to-bullish bearing which could reverse the commodity from the 16.32 level.

Heading south, immediate strong support comes from the area 16.38 to the lower Bollinger band, which also captures the 61.8% Fibo of 16.32. Conquering this barrier, the commodity could tumble for the 15.91 swing low of August 1. If selling interest persists, the 76.4% Fibo of 15.53 could come under pressure before the plunge reaches the 14.88 low.

Otherwise, if the 16.32 border holds, initial resistance may come from the 50.0% Fibo of 16.95 and the 200-day SMA at 17.11. Overcoming these, a key region from the 100-day SMA at 17.48 to the 50-day SMA at 17.71 – which encapsulates the mid-Bollinger band and the 38.2% Fibo of 17.58 coinciding with the swing high – could prove a tough obstacle to surpass.  Overrunning this the 18.21 resistance and the 23.6% Fibo of 18.36 could impede the price from reaching the upper Bollinger band and the previous tops.

Summarizing, the shiny metal sustains a cautiously bearish stance above 16.32, with only a break below confirming a negative outlook and a bearish crossover by the 50-day SMA reinforcing this view.