Technical Sentiment: Bullish
- Positive report on China Manufacturing Data lifted the precious metals in early trading;
- Silver found support around $19.25;
- Bullish continuation expected above the 200 Moving Average on 4H time frame.
Silver has been on a path of recovery since the 1st of May, when traders tripped stop losses all the way down to $18.67. Since then the precious metal has been gradually forming a bullish configuration with two Higher Lows and Higher High which stopped short of the $20 handle. If the bullish configuration stands, Silver will take another stab in the coming days to test and probably take out the $20 handle.
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If we look at price action solely during the month of May, we can clearly observe a bullish trend with price currently probing the 200 Simple Moving Average on the 4H timeframe. A break and close above the 200SMA, priced at $19.55, suggests Silver is ready to complete a third bullish wave. The first hurdle is the 50-Day Moving Average ($19.78), which also coincides with previous highs from April and early May.
A Daily close above $19.78 will expose the $20.00 handle (38.2% Fibonacci from $22.16 down to $18.67). Longer term, Silver should stabilize above it and go on to complete a full 61.8% Fibonacci Retracement toward $20.83 (also the 200-Day Moving Average).
The bullish configuration will be invalidated on the spot if Silver drops below the most recent Higher Low at $19.25. This move would once again trigger a cascade of stop losses from long positions accumulated this month, dragging Silver down to $19.00 and $18.67 in the process.
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets