Silver 1 OZ 999 NY (XAG=X) Prices are Rallying, Where Should Investors Look to Take Profits?
It’s been a wild week in the markets, and the silver lining for the precious metals sector is that the sell-off finally pushed some off the offside and wildly bullish small speculators out of their positions. In addition, the 13% drop in the silver (SLV) price scared off some of the bulls, and we got the dip we were looking for in bullish sentiment.
Bullish sentiment finished last week at 44% bulls, the lowest reading in over nine months, and finally dropped beneath the October sentiment lows at 50%. Based on this drop in bullish sentiment and a slight drop in speculative positioning, we have finally seen a step in the right direction for a bullish setup. This does not mean that it’s time to buy with both hands, but we’ve seen a massive improvement from where we sat two weeks ago.
As we can see in the chart above, bullish sentiment finally took a nice hit last week, dropping nearly 50 points from 88% bulls to 44% bulls. The great news about this drop was that we finally took out the October lows near 50% by over 500 basis points (44% vs. 49%), despite only a slight drop beneath the October lows from a price standpoint.
This suggests that the bulls are getting more scared than they were in October despite roughly the same price on silver. While a reading of 40% bullish sentiment is hardly a level where I would consider we have outright panic, it is a massive improvement from where we sat a week ago, and a big step in the right direction. Ideally, however, I would like to see bullish sentiment drop below 40% bulls to set up a strong buy signal.
Finally, moving to a daily chart of silver, we can see that the bulls were unable to defend $16.60/oz last week, but this level now remains a key pivot going forward. If the bulls can reclaim $16.60/oz this week by the Friday close, this support will move back in place, as I would consider last week’s decline merely a shakeout.
However, we still have strong resistance at $18.95/oz overhead, and I would expect this area to be a brick wall of resistance until the small speculators start doing some selling. Therefore, I continue to believe this is a wise area to take profits on further rallies. While I would not be surprised to see silver head north of $20.00/oz by year-end, I’m less inclined to believe it will happen before May.
To summarize, I continue to see drops beneath $16.60/oz as buying opportunities but see no reason to chase above $17.00/oz. If the market does continue to rally, I would view the $18.95/oz level as a wise spot to book some profits. All of the time-frames continue to remain bullish for silver, but until the small speculators give up more of their positions, it’s hard to envision $19.00/oz being taken out.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 17.97.
The projected lower bound is: 16.37.
The projected closing price is: 17.17.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 28 white candles and 21 black candles for a net of 7 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 22.4982. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 41.81. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 39 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -109.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAG= closed up 0.448 at 17.177. Volume was 8,900% above average (trending) and Bollinger Bands were 73% wider than normal.
Open High Low Close Volume___
16.725 17.455 16.690 17.177 50,192
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 17.80 17.84 17.04
Volatility: 46 29 27
Volume: 5,019 1,004 251
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAG= is currently 0.8% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect very strong flows of volume into XAG= (bullish). Our trend forecasting oscillators are currently bearish on XAG= and have had this outlook for the last 2 periods.