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Confluence Increases Potential Significance
Notice that prior to an upside breakout above a trendline last Wednesday, silver successfully tested resistance at the trendline for three consecutive days. When the bull breakout day came the related resistance zone was marked by the confluence of several indicators. An uptrend line, 50-Day MA line, and the 20-Day MA marked a price resistance zone from approximately $32.49 to $32.53.
Wednesday’s bull breakout was confirmed on that day by a daily close above the resistance zone, and further on Thursday when the day closed at that support zone. However, on both Wednesday and Thursday silver traded above and below the support zone. Today, there is a possible change that has occurred.
Resistance Becomes Support
A bullish continuation signal was generated today on a rally above Thursday’s high, and support has been seen at the 20-Day MA. Therefore, today will be the first day that the range for the day was above support represented by the 20-Day line. This behavior shows the potential progression of the uptrend as prior resistance was successfully tested as support at the 20-Day MA. The same cannot yet be said for the 50-Day MA, although currently silver is on track to close above the 50-Day line for the second time since Wednesday’s breakout.
Strength Remains, but Could Fade
Today’s successful test of 20-Day MA is only valid if it continues to show support moving forward. At the same time, silver is extended after a sharp $4.80 or 17% rally in only seven days. The day may end with silver forming a bearish shooting star candlestick pattern on key support. Therefore, a decisive decline below today’s low of $32.43 puts silver at risk of a deeper bearish pullback as the reversal candle will have triggered and support at the 20-Day MA would have failed.
For a look at all of today’s economic events, check out our economic calendar.
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