Last week, silver prices updated the lows since mid-March. The price actively declined, testing the support at $21 per ounce. The candlesticks on the daily chart have long lower shadows - evidence of active purchases of silver below 21. The bears hurried to take profits when they met the resistance. On Friday, we saw a strong rebound of silver prices upwards. According to the technical indicators, the upward movement is just beginning.
On Friday, the fall in silver prices stopped after the release of September statistics on the U.S. labor market. In general, the data can be assessed as mixed, but financial market participants were noticeably cheerful after its publication. Is such a surge of optimism justified, or traders just overreacted?
A negative factor is still growing number of new jobs in the U.S. According to the results of September, their number increased by 336 000. It was more than both the indicator of August (227 000) and the forecast of analysts (170 000). Moreover, this is the maximum growth of the number of new jobs since January this year. However, at the same time, there is evidence that confirms the cooling of the U.S. labor market.
Contrary to expectations, the growth rate of wages slowed from 4.3% to 4.2%. At the same time, the unemployment rate remained at 3.8%, although it was expected to fall to 3.7%. On the one hand, the figures show the resilience of the U.S. labor market amid high interest rates. On the other hand, there is no need for further tightening of monetary policy. Such a soft landing scenario for the economy, if it does materialize, will be an important factor for silver prices.
The reversal of silver prices upward from level 21 is followed by the exit of the technical indicators RSI and Stochastic from the oversold zone. This increases the chances of the price growth continuation. The bulls may consider the range of 22.2-22.3 as the nearest target, which matches the minimum marks of June, August and September.
The following trading strategy might be suggested:
Buy silver in the range of 21.5-21.7. Take profit – 22.2. Stop loss – 21.
Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
