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Chart Of The Day: Silver Is The Next Target

By Fawad RazaqzadaCommoditiesJan 29, 2021 09:13AM ET
www.investing.com/analysis/chart-of-the-day-silver-is-the-next-target-200557484
Chart Of The Day: Silver Is The Next Target
By Fawad Razaqzada   |  Jan 29, 2021 09:13AM ET
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This article was written exclusively for Investing.com

Despite the recent rebound in bond yields and the US dollar, silver rallied sharply on Thursday and looked set to extend those gains at the time of writing in the early hours of Friday.

It looks like the metal has become the latest target for Reddit day traders who were restricted from speculating on heavily-shorted stocks like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) on some trading platforms.

New posts on WallStreetBets on Thursday encouraged people to pile into iShares Silver Trust (NYSE:SLV), which is the largest silver exchange-traded fund. This was possibly behind the metal’s biggest one-day rally since August.

The rally means that after months of consolidation between around $25 to $29, silver has now shown some tentative bull signals that would suggest a fresh rally could be on the cards.

Silver Daily
Silver Daily

Even before Thursday’s rally, the multi-month consolidation, without too much of a pullback from its 2020 high, is in itself a bullish sign, as it suggests the market probably did not peak in August—for if it did, surely prices would have fallen more aggressively by now.

Indeed, from the high of just under $30, silver has not even given back 50% of the gains made since hitting a low in March 2020. The relatively shallow retracement suggests the long-term bull trend remains intact and that silver could be gearing up for a potential breakout soon.

Secondly, silver’s desire to hold around the 21-day exponential moving average, and well above its still-rising 200-day simple average, is indicative of a bull trend.

More to the point, silver created a clear bullish signal on Thursday after breaking through recent resistance zone in the $25.90-$26.00 range after a sharp 5% rally. If the breakout holds above this region then this would keep the bulls interested in looking for fresh technical buying in the days to come.

While the signs look quite promising for the bulls, let’s not forget that silver is still technically inside a larger consolidation pattern and as such it is far too early to get too excited.

For confirmation, silver now needs to print a clear higher high above the peak it made earlier in the month around $27.90ish. A break above this level would also lift silver above the bearish trend line which has been in place since August 2020.

So, we do need to see that breakout, especially given the recent dollar rebound. Indeed, if silver were to go back below that key $25.00 handle again, then at that point you will have to drop any short-term bullish views you might have on the metal and await further bullish price action at some future point in time before looking for long trades again.

Chart Of The Day: Silver Is The Next Target
 

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Chart Of The Day: Silver Is The Next Target

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Comments (9)
Obugi Ahamadu
Obugi Ahamadu Feb 01, 2021 5:07PM ET
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Mr Razaqzada, thanks for a very prescient view.  You've earned a lot of cred for this.
Di Ni
Di Ni Jan 29, 2021 1:14PM ET
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Retail taking on JP Morgan through buying up SLV. Err, someone needs to tell these guys that the banks control/own SLV too. Banks can never lose.
Venu Gopal
Venu Gopal Jan 29, 2021 1:14PM ET
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what about silver on Monday
Ross Dre
Ross Dre Jan 29, 2021 1:14PM ET
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You’re right... but they have been aolely responsible for criminally holding the price down while they quietly accumulate. Yes, they would benefit but the idea is that retail would finally get their day.
Ross Dre
Ross Dre Jan 29, 2021 1:14PM ET
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Ross Dre silver under $100 is a joke!
William Cole
William Cole Jan 29, 2021 12:58PM ET
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it's going to be a really interesting time for us hold on tight.
Evan Ault
Evan Ault Jan 29, 2021 12:28PM ET
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swear I saw this show 20 years ago...
Hunt Richardson
Hunt Richardson Jan 29, 2021 11:56AM ET
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silver is also used for antiseptic purposes, lining water tanks, fountains, etc. spot on
Stephen Fa
Stephen Fa Jan 29, 2021 9:06AM ET
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I do like the fundamentals of Silver from increasing demand. I wait until after the Reddit rally corrects to buy long.
Notvery Goodathis
Peteymcletey Jan 29, 2021 8:37AM ET
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given all of the things posted there, sounds like the author found the one that best fit his own agenda.
Rodolfo Barraco
Rodolfo Barraco Jan 29, 2021 8:26AM ET
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Silver is going to the moon. Is a hedge a safe heaven is for electric cars and solar panels and now also a meme. 50 first and 75 later 🚀🚀🚀
Din Joekhannaz
Din Joekhannaz Jan 29, 2021 7:38AM ET
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They found out that JP Morgn is suppressing the silver and gold price for years... its the reason they launch the attack
Joe Hanna
Joe Hanna Jan 29, 2021 7:38AM ET
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nice name
 
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