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Ideas You Can Trade: Silver- Support Needed to Avert Bearish Channel

Posted by Steven Hatzakis on Nov 13, 2013 7:01:00 PM

Silver: Downwards Momentum May Test Upper Line of Medium Term Bearish Channel

 

The medium term daily candle chart below shows the price of silver  trying to find support near a critical medium term static horizontal support line (near 20.60) and trading near 20.65 as of publication, after closing lower in eight of the last ten trading sessions. The last time Silver was covered in the Ideas You Can Trade series in early September it had resumed its downtrend after breaking out of the medium term bearish channel (point 3 in magenta on chart) that had contained the essence of the trend over the past year.

Today the upper line of that medium term bearish channel (point 3) appears to be an imminent target if the momentum of the last 2 weeks continues along the current short term bearish line (point 1). The precious metal has had difficulty re-entering the medium term bearish channel (point 3) due to the inability to successful hold below its upper resistance line for more than a few trading sessions.  

Concurrently, in today’s session Silver may find the support it needs near current prices which coincide with a horizontal support line, which has described above has be a key trigger of medium term reversal. If this happens and a further drop is averted, silver may continue up a steep short term bullish line (such as point 5 in aqua) that could develop and leading to retest under the long term bullish channel support line (point 4 in green).

Earlier in August in a previous article before the above mentioned post in September, a longer term perspective was taken with two charts for comparison. In an effort to better ascertain the essence of the trend constituents, we will look again at both a medium term daily candle chart going back just over a year, as well as a longer term chart covering multiple years (analysis and numbered points on chart are with regards to the medium term chart).

 Below are examples of how to trade a bearish continuation or a bullish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 20.89 with a Limit to take profit @ 21.23 and a stop-loss @ 20.49  Risk/Reward Summary: Limit risk = +87 points profit / (-40 ) Stop-loss risk = Gain to Loss ratio =  2.17

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 20.36 with a Limit to take profit @ 19.77 and a stop-loss @ 20.68 Risk/Reward Summary: Limit risk = +59 points profit / (-32 ) Stop-loss risk = Gain to Loss Ratio = 1.84  

Medium term chart (daily candles):

silverdaily daily nov 13 note

Long term chart (daily candles):

silverdaily nove 13 note longer term
 

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