Ranging Phase Ahead For Silver But Breakout On The Horizon
Blackwell Global | Nov 10, 2016 12:30AM ET
Key Points:
- Silver could be heading for a breakout in the coming weeks.
- The metal should become bullish due to its technical readings.
- Trump’s election could have less influence on safe haven investments than was forecasted.
Whilst silver might have had a more measured response than the wider market to yesterday’s political upset, the metal could be poised to experience some significant upsides in the medium-term. Predominately, this is expected to occur as a result of the imminent end of a bearish chart pattern, but post-election fallout could also play a role in buoying silver prices.
As is shown below, the medium-term bearish channel remains in place which should, for a few weeks or so at least, keep silver prices rather restrained. In fact, even with the general chaos of yesterday, the metal’s surge only served to confirm the presence of the upside constraint of the structure. However, due to the robustness of this channel, one could be led to believe that the medium-term forecast should be bearish for silver moving forward rather than bullish. Fortunately for the bulls out there, there is another trend line in play which alters the story slightly.
The presence of the long-term ascending trend line reveals that the metal’s ability to push lower should be significantly capped in both the medium- and near-term. Furthermore, the 50.0% Fibonacci level and 100 day EMA are capping upside risks which should result in a ranging phase for silver as it rapidly approaches the point of convergence of the bearish and bullish chart patterns. Once this point is reached, a breakout is almost certain to occur which should see some sizable gains for the metal come mid-December.
But why is the ascending trend line likely to prevail over the bearish channel one might ask? Largely, this bias is based on both the current and projected EMA activity shown on the daily chart. Specifically, the 12 and 20 day moving averages are currently in a bullish configuration which should see buying pressure begin to mount as the metal moves towards its possible breakout point. Additionally, when it does reach this point, the 12 and 20 day averages should have intersected the 100 day EMA which will only add to the bullish bias.
Ultimately, we will have to keep an eye on silver moving ahead as Trump has proven to be more than capable of upsetting the markets but, more recently, also able to allay its fears over his impending role as commander-in-chief. Therefore, the widely circulated argument that his election will only see safe haven investments soar could be somewhat weaker than initially intimated. As a result, technical factors like those mentioned above could play a stronger role in directing silver prices than some might admit.
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