Silver neutral

Silver is about to exit flat

31 January 2023 178
Silver is about to exit flat

Silver continues its movement in a usual sideways pattern, making its way from the lower boundary of 23.2 to the upper boundary of 24.2 and then returning to the initial positions. However, today we see a serious downward momentum, which is trying to break down the established trading range. Let's see if this attempt is successful.

As it is well known, the longer the sideways movement lasts, the stronger the price impulse will be when breaking out of the range, irrespective of the direction (up or down). The current sideways movement has lasted for 2 months. It is quite a long period, as if a break-down of the lower boundary at 23.2, that the "bears" are trying to do today, will be recorded, we can expect a strong decline in silver down to the level of 22-22.2

On the other hand, on Monday there was already an attempt to break the level of 23.2. As a result, the daily candlestick of January 23 has a long tail from the bottom, but the breakdown turned out to be false, and the most of the drawdown was bought the same day. Therefore, highly cautious traders have to wait for the trading session to close with the decreased price being fixed under the level of 23.2, and to open short positions the next day.

However, traders should keep in mind, that in terms of fundamentals, silver's prospects for the year remain favorable. Therefore, the stronger the current decline, the more attractive prices appear for those who were going to increase the share of precious metals in their portfolio, but did not want to buy at the highs so just waited for a correction to come.

If silver quotes will come out of the sidewall at the end of the day, the actual target for the further fall will be 22-22.2. If it manages to stay above 23.2, it is worth waiting for a new move to the upper boundary of the current range at 24.2.

The following version of trading strategy might be offered:

1) Sell silver at the close of the trading session below 23.2. Take profit – 22.2. Stop loss – 23.5. 

2) Buy silver at the close of the trading session above 23.2. Take profit – 24. Stop loss – 22.9.

Traders may also use Trailing stop instead of a fixed Stop loss at their convenience.

This content is for informational purposes only and is not intended to be investing advice.

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