Silver Ripe For Reversal

Silver has been charging up the charts ever since it broke out of the bearish trend it was trading under for some time. That bullish push now looks to have come to an end with a large head and shoulders pattern forming.




Last week’s speech by Fed Chairwoman Janet Yellen and the FOMC minutes earlier in the week did not really surprise anyone in the metals markets but they did add some volatility to the precious metal. A rate rise in June is all but ruled out, and most analysts are picking a rise in September, but this will all depend on economic data. For now the US looks a little shaky, but for the most part silver will not see any strong trends until the timing of rate rises becomes clearer.

The head and shoulders pattern that has formed on the silver H4 chart above is not a classic, text-book example of the pattern, but the structure will nonetheless have the same effect. It is certainly a top pattern that points to the turning sentiment between the buyers and the sellers with the sellers coming out on top, but the buyers aren’t going out without a fight. The lower highs seen on the most recent candles show this fight.

There are also some news items out of the US which could add some direction to Silver. US Core Durable Goods, Consumer Confidence, Home Sales, Unemployment Claims and consumer confidence are all things to watch out for this week. The data has not been too flash out of the US recently so expect some mixed messages.

The price of silver has pulled back up to the ‘neck-line’ which, if it holds, will likely see a strong rejection that will target the previous bearish trend line as support. Watch for the 100 H4 SMA as this will likely act as dynamic support on the way down. Firm support will be found at 16.998, 16.698 and 16.143 while resistance is found at the current level of 17.191, 17.529 and the recent top at 17.755.