Silver 1 OZ 999 NY (XAG=X) Update: Likely to Back Off Short Term
Silver has shown strong moves in both directions on Wednesday, as the markets remain jumpy in the aftermath of the U.S. drone strike which killed an Iranian general and sent shock waves across the Middle East. Currently, silver is trading at $18.41, up 0.17% on the day.
Investors Keep Eye on Safe-Haven Silver
With tensions in the Persian Gulf and across the Middle East at a fever pitch, safe-haven assets, such as silver and gold, are in demand. Gold investors are smiling, as the metal climbed as high as $1611 on Wednesday, its highest level since March 2013. Silver prices have also headed higher – in Wednesday’s Asian session, silver touched a high of 18.84, its highest level since September 5th.
On Wednesday, Iran attacked several military bases in Iraq on Wednesday, and a response from the U.S. could further unnerve investors and boost the safe-haven U.S. dollar. The unsettled state of the markets represents an opportunity for quick entries and exits, but traders should exercise caution.
U.S. Services PMI Within Expectations
The ISM Non-Manufacturing PMI was stronger than expected in December. The PMI accelerated to 55.0, up from 53.9 in the previous release. This figure beat the estimate of 54.5 pts. The PMI continues to point to expansion in business activity, as the services sector continues to outperform the manufacturing industry.
Next – ADP Nonfarm Payrolls
Investors will be treated to a host of employment releases this week, which are important gauges of the health of the U.S. economy and could affect silver prices. Later on Wednesday, we’ll get a look at the ADP nonfarm payrolls, which dropped to 67 thousand in November. Analysts are expecting a strong turnaround in the December release, with an estimate of 160 thousand. On Friday, the U.S. releases official nonfarm payrolls, which is forecast to fall to 150 thousand, down from 266 thousand a month earlier. Wage growth is expected to rise to 0.3%, up from 0.2% in November.
Silver Technical Analysis
The forecast for silver remains positive. Silver has managed to climb some distance from the 18.00 level, although this line certainly remains relevant and is providing support. Below, we find support at 17.50, followed closely by the 50-EMA line at 17.44. On the upside, silver tested resistance at 18.60 in the Asian session. Above, we find resistance at the round number of 19.00.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 17.54.
The projected upper bound is: 18.62.
The projected lower bound is: 17.51.
The projected closing price is: 18.06.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 6 white candles and 3 black candles for a net of 3 white candles. During the past 50 bars, there have been 29 white candles and 20 black candles for a net of 9 white candles.
An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend (which appears to be the case with PREC.M.XAG=). It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend, it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.
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 51.4731. This is not an overbought or oversold reading. The last signal was a sell 6 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 62.69. This is not a topping or bottoming area. However, the RSI just crossed below 70 from a topping formation. This is a bearish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 0 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 113.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 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 buy 18 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAG= closed down -0.331 at 18.057. Volume was 8,900% above average (trending) and Bollinger Bands were 28% wider than normal.
Open High Low Close Volume___
18.394 18.847 18.010 18.057 55,582
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 17.98 17.29 16.46
Volatility: 17 20 24
Volume: 5,558 1,112 278
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 9.7% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into XAG= (bullish). Our trend forecasting oscillators are currently bullish on XAG= and have had this outlook for the last 13 periods.