Technical Analysis – Silver repeats July’s bullish dynamics

Christina Parthenidou, XM Investment Research Desk

Sliver is repeating July’s dynamics as it stubbornly pushes for fresh highs this week. The price found new buyers and hit a fresh five-year top at 28.29 on Thursday after crossing above the 38.2% retracement level of the 2011-2020 downtrend. The metal is already up 14.5% so far this month.

Although the market is trading in overbought terittory in all timeframes, the momentum indicators have yet to show signs of weakness, keeping the risk tilted to the upside. Specifically, in the daily chart, the RSI is regusing to drop below 70, while the Stochastics have just bounced back above 80.

If silver extends its winning streak,the 29.36 barrier could next grab attention before the focus turn to the 50% Fibonacci of 30.70. If the latter proves easy to get through, the rally may stretch towards the 2012 peaks registered within the 35.22-37.47 zone, where the 61.8% Fibonacci is also placed.

For the bears to take control, the price needs to slide below the 38.2% Fibonacci of 26.20 and close beneath the supportive red Tenkan-sen line at 25.20. In this case, the blue Kijun-sen and the 20-day simple moving average (SMA) may next come under the spotlight.

Meanwhile, in the bigger picture, a drop below 19.63 is required to downgrade the outlook from positive to neutral.

In brief, silver is expected to trade bullish in the short-term, though downside corrections cannot be ruled out as the metal moves in overbought waters.