Markets

Technical analysis of silver as of August 10, 2020

By Markus Blaschzok for GoldSilberShop.de 30 US dollars for the troy ounce, + 150% since March low

Futures market: Relative strength and plenty of powder for a rise

In the case of silver, speculators built 3.6 thousand contracts on the futures market last week and the price rose by US $ 1.7. This is a very good weekly development and still shows a deficit in the physical market. On the other hand, here too the momentum decreased as of Tuesday. We do not even see the relative weakness in the rising prices that we would need to trade short silver at the moment. Short trades still have a high risk in the short term, even if a setback is now likely in the medium term. Nevertheless, with this data one must expect a further increase in the silver price, at least for a week. There is enough silver in JP Morgan’s warehouses to put pressure on the price at any brand desired. We still don’t have a great setup for a nice short trade.

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The futures market is neutral and showing relative strength – the rise could continue

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Unlike in previous years, we cannot detect any manipulation or an attempt to slow down the price increase Sharp rise after breaking resistance at $ 19.60

In the long-term chart in US dollars, you can see that there has not been a similarly strong price increase in history in such a short period of time. While we have traded small trading ranges of $ 3 to $ 5 for the past seven years, the price of silver rose almost continuously from the crash low in March to $ 18 peaks to the resistance at $ 30.

The resistance at $ 19 showed significant relative strength in the data, which is why we believed a bullish breakout and rise were likely. In that case, I advised my readers to just stay on the buy side as it was very likely that the price would go straight up to $ 26 non-stop. If such a significant long-term resistance is broken, then all bears will keep their feet still and will not dare to take a counter position until the next resistance at USD 26 at the earliest. On the other hand, such a breakout lures additional bulls into the market, ready to take profits at the earliest at the resistance at $ 26. And so it happened that after the breakout, the price of silver not only rose 7 US dollars, but 11 US dollars up to the psychologically round mark of 30 US dollars without much correction.

The futures market data is currently not showing any weakness, but this increase is not driven by the futures market either, rather a deficit on the physical market is responsible for it. Only when this investment demand subsides is a price correction, which can be abrupt, possible. Right now we can’t even rule out a further rise in price until the next resistance at $ 36, given that the underlying demand is so strong in the short term.

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Silver is currently experiencing the strongest rise in its history

The short-term chart shows the breakout above $ 19.60 again. There were nice short term continuation patterns on the chart with clear breakouts and steep climbs with no setbacks that were easy to trade. It was only after reaching the resistance at $ 26 that there was short-term profit taking and a small long drop in the silver market, which caused the price to fall 14% in one day. The CoT data showed, however, that the speculators who were shaken out did not get back into the market as quickly as the price rose again, driven by fundamentals. The breakout above the trading range above US $ 24.60 resulted in a small short squeeze and a FOMO, which is why the resistance at US $ 26 was also taken immediately and an increase to US $ 30 followed.

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There is still buying pressure in the silver market

The short-term chart shows that profit-taking has started after the resistance at $ 30 is reached. The beginning of the week will show whether this is the beginning of a longer-term correction phase or just a continuation formation before the steep rise continues. As long as we do not see any relative weakness on the futures market, this confirms the trend, so we have to accept buy signals from the chart and follow the silver price pro-cyclically. So we work our way from CoT report to CoT report week after week and create more analyzes of the gold and silver market in order to be fully there if the rise should continue or to leave the market if the price corrects. The downside is the high inventory of JP Morgan, which could be sold on the open market at any time. The fact that the rally is driven fundamentally and not via the futures market are factors that could force quick setbacks, which is why stop-loss orders should be placed in trading. Long-term investors, on the other hand, can sit back, because silver will continue to rise significantly in the next few years, even if it will be a bumpy and volatile ride.

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Correction or continuation pattern at the $ 30 resistance?

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