What’s inside:
- Silver prices trading at resistance
- Rising wedge formation coming into focus
- Risk skewed to downs-side at this time
The price of silver is at a critical spot here, as it trades at the upper-end of a developing daily range. On Monday, we said risk appears to have become skewed to the downside with the recent rally taking the metal into a known area of resistance between approximately 20.48 and 20.66. Yesterday, silver moved to 20.76, but was unable to hold higher levels.
An ascending wedge is taking form within the upward channel which has kept it guided lower since coming off the 19.20 level.
The wedge could of course break to the upside, but given its location with resistance at hand presents an interesting scenario for would-be shorts, while providing those holding long positons a warning sign to button up trailing stops, should it trigger to the downside.
But even on a break of the lower trend-line of the ascending wedge, the bottom-side parallel of the channel developing since the third week of July may provide support. A break of the wedge would likely spark an initial round of selling, but could quickly find buyers. How silver would react at that point is what would pique our interest the most. A hold and turn higher doesn’t necessarily give the all-clear to the longs, as resistance would still quickly loom just ahead, but we would still have to respect the current near-term trend support in place. However, a break of the lower parallel would undermine the short-term uptrend, validate resistance, and open the door up for further losses back to 19.20.
The bullish alternative is to see a breakout to the upside of the wedge and full clearance on a daily basis of 20.76, thus paving the way for a test or better of the July 4 spike high at 21.11.
Keep in mind, this is all short-term stuff. The intermediate to long-term trend off the December lows remains pointed higher even if silver does break down back to the low-end of the month-long range.
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX.
He can be emailed at probinson@fxcm.com with any questions or comments.