Silver Price Sell-off and Taking Advantage of It

What’s inside:

  • Silver price showing unrelenting weakness
  • Looking for a move towards the December low soon
  • Outlined scenarios for taking advantage of further weakness

Which direction will gold & silver head in Q3? Check out our forecasts!

Gold has found a little buying interest around the May low, while the price action in silver price has been weaker, with offers coming in on every uptick. A theme which is unsurprising given the general relative weakness we’ve seen in silver compared to gold in recent months. Silver is only a bad day away from the December low while gold still needs to drop $100. This disparity makes silver the preferred short between the two major precious metals.

As we mentioned the other day, the December low (15.64) is our first target on further weakness; also in potential confluence are a pair of short and intermediate-term slopes. There are even bigger long-term levels which could come into play on a break of last year’s low (2003 trend-line being the biggie). However, establishing a fresh short at current levels doesn’t hold the most favorable risk/reward in our view. Ideally a bounce develops back towards a retest of the broken December 2015 and 2016 trend-lines along with the 6/26 ‘gold fat finger’ spike-low and towards the June trend-line. The area up in the vicinity of 16.25/45 is likely to present difficulty for buyers to push silver on through if it is to continue lower.

That is our ideal – short a failed bounce into resistance. But we don’t often get our ideal, and silver may be too weak to even mount a recovery to the before mentioned levels. If this is the case, then a day or two of horizontal price movement may be all that is offered for traders before we see a continuation-trade develop. A ‘dead-cat’ bounce (a very small bounce amidst a strong decline) around or just below the May low, and subsequent break lower is our alternative approach. Of course, silver could just continue its one-way course lower towards the December low or worse. On this end, chasing momentum isn’t an ideal way to enter, but for the vigilant momentum-trader this could be the way to go.

Heads up – Tomorrow, the June U.S. jobs report is due out. Expect volatility, and depending on whether or not there is a large deviation from the consensus +173k NFP number, the uptick in price movement could be material.

Silver: Daily

Silver Price Sell-off and Taking Advantage of It

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—Written by Paul Robinson, Market Analyst

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