Silver: Target of 18.50 Reached, yet Support barely Holding
The medium term daily candle chart below shows the price history of Silver, a contract for difference (CFD) on the underlying precious metal Silver. This metal is currently trading around 18.49 around time of publication today.
In the last post about Silver in the Ideas You Can Trade series, the metal was described as nearing support on 18.50 within a downtrend.
Since then support has been reached today on that target, and appears to be barely hanging on as a lower-low is made for 2014, and mounting downward pressure.
Drawing a trend-line from the previous lows of this year, the support line which is slightly downwards sloping means that Silver could reverse around current levels as it has on this line on at least three prior occasions.
Whereas if this support line (yellow line on chart below) fails to hold the downtrend, then the bearish momentum should continue with the next step 18.00 or lower.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 18.90 with a Limit to take profit @ 19.19 and a stop-loss @ 18.75 Risk/Reward Summary: Limit risk = +29 points profit / (-15) Stop-loss risk = Gain to Loss ratio = 1.93
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 18.45 with a Limit to take profit @ 18.01 and a stop-loss @ 18.79 Risk/Reward Summary: Limit risk = +44 points profit / (-34) Stop-loss risk = Gain to Loss Ratio = 1. 29
Medium term chart (daily candles):