Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart Of The Day: Why Silver Will Fall Despite Rising Risk-Off Sentiment

By Investing.com (Pinchas Cohen/Investing.com)CommoditiesJul 20, 2021 14:21
uk.investing.com/analysis/chart-of-the-day-why-silver-will-fall-despite-rising-riskoff-sentiment-200487488
Chart Of The Day: Why Silver Will Fall Despite Rising Risk-Off Sentiment
By Investing.com (Pinchas Cohen/Investing.com)   |  Jul 20, 2021 14:21
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Last week, we provided a bearish call on gold, saying that if spiking inflation wasn’t a strong enough catalyst to push the precious metal higher, that's a bearish sign. Indeed, after that point, the yellow metal slumped, completing a bearish wedge, which has provided resistance to today's gold price.

Now we're focusing on silver, which, even as risk-off sentiment seems to be escalating, we expect will head lower. Blame it on the current increase in Treasury buying, which strengthens the US dollar, the base currency in which the precious metal is denominated, making it more expensive.

We've noted in previous articles that the fact that gold alone was rising, within the wedge, while silver and copper were not, suggested that investors were not perhaps being driven by concerns of higher inflation, but rather more likely by the Delta variant as a risk factor to stocks.

Whatever the case, now, investors appear to have put all their safe haven investing behind just one asset—Treasuries. Yields have lost as much as 60 basis points since the Mar. 30 peak, as investors have been snapping up US government bonds for their portfolios, even amid continued record highs for stocks. This could also indicate either a market debate concerning the outlook for economic recovery, or a hedge against over-stretched valuations.

Gold is traditionally the more common haven asset than silver, which may provide a reason why silver is down 2.5% today, losing 4.75% over the last two days. Could just be the white metal is perhaps acting as a leading indicator for gold. Here's what the supply-demand dynamic looks like on the daily chart:

Silver Daily
Silver Daily

On Monday, silver provided a downside breakout for a small, month-long, H&S continuation pattern, which included crossing below the 200 DMA, and which fit well within its falling channel. This is the second consecutive bearish pattern, after the H&S top that reversed the previous uptrend.

Here's what the wider perspective is indicating:

Silver Weekly
Silver Weekly

Silver's two previous bearish patterns were the market devices to help bears push the price from the top to the bottom of a symmetrical triangle. Today, the price found support at the bottom of the triangle, for a second day.

Beware, however, demand may overcome supply. That would push the white metal back toward the top of the pattern—which happens to coincide with the psychological round 25.00 number. Nevertheless, the weekly RSI indicates momentum is to the downside. The MACD triggered another minor bearish cross since it topped out soon after the triangle began to emerge.

Trading Strategies

Conservative traders should wait on a short position for the price to fall below the Mar. 31 low (corresponding to the Mar. 30 peak for yields, mentioned above), then attempt a rebound that would peak below July 6 high (the head of the H&S continuation pattern), to establish a peak-and-trough downtrend.

Moderate traders, hoping for a return-move, could short near the neckline of the recent H&S.

Aggressive traders would enter a contrarian long position, counting on the support of the bottom of the triangle, which could be the catalyst for a corrective rally to retest the H&S continuation pattern, before joining moderate traders with a short. Money management is crucial, even more so, with riskier trades. Here’s an example:

Trade Sample 1 – Aggressive, contrarian Long Position

  • Entry: 25.00
  • Stop-Loss: 24.95
  • Risk: 0.05
  • Target: 25.75
  • Reward: 0.75
  • Risk:Reward Ratio: 1:15

Trade Sample 2 – Moderate Short Position

  • Entry: 25.75
  • Stop-Loss: 26.00
  • Risk: 0.25
  • Target: 25.00
  • Reward: 0.75
  • Risk:Reward Ratio: 1:3

Author's Note: These are just samples and not necessarily the only ways to approach these trades. Also, they're not the full analysis. If you didn’t read, understand and accept the risks described in the post, do NOT trade. The analysis is merely our interpretation of the market dynamics and of the principles of technical analysis. We could be wrong. Even if our interpretations are sound, they only establish a statistical forecast. They are not a crystal ball. The objective of trading is to achieve success on a statistical basis, not an individual one. Trading is nothing more than luck management, as the trader attempts to get on the side of statistics. Before you enter a trade, realize you could lose the capital you committed. If you can’t handle that loss, do NOT enter a trade. You need to develop your own trading style, which suits your budget, temperament and timing. Your trading plans must reflect that. Until you learn how to do that, you may follow our samples, for education, though not profit...or you will end up with neither. Guaranteed. And no money back.

Chart Of The Day: Why Silver Will Fall Despite Rising Risk-Off Sentiment
 

Related Articles

Chart Of The Day: Why Silver Will Fall Despite Rising Risk-Off Sentiment

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Rodolfo Barraco
Rodolfo Barraco Jul 20, 2021 20:23
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yesterday all was down 3%. Gold hold ground down 0.2%. Gold is back as safe heaven even with dollar pushing higher. This is the last dip to buy. Silver always is laggard following suit. Both will soar before 30 days have passed. Surprised no one is comentingOn gold strong performance this week despite the sell off and dollar strength
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email