Regardless of the direction the market takes, high volatility can be expected.
- silver showed a minor rally during Wednesday’s trading session, indicating renewed strength as it continues to hover around its 50-day exponential moving average.
- With an expected announcement from the Federal Reserve later in the day, the market is likely to be strengthened volatility. In recent times, silver has been used as a hedge to preserve wealth. The question now is whether the apparent “bottom pattern” will continue to develop.
- So far, it seems likely that there are plenty of buyers willing to put money to work to make it so.
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It is 200 days below the current level EMA it provides support near the $23 mark. If the market were to give up this EMA, it would signal a bearish turn of events. This could potentially open the door to a test of the $22 level and possibly the $20 level below – a region we saw a strong bounce from earlier. If the market were to break below the 200-day EMA and the 61.8% Fibonacci level, the $20 level is likely to emerge as a target. These areas would be significantly important if we were to go lower, but they would also show that we are more likely than not to see a lot of strength in the US dollar, as the two markets are quite strongly negatively correlated most of the time.
Conversely, if the market breaks through last week’s highs, we could see a rally towards the $25 mark. This level has psychological significance due to its round shape and history as a strong support zone, so it may represent some resistance due to “market memory”. However, if the market manages to break this level, it could pave the way for a move towards the $26 level and potentially even the $26.40 level, where the market previously peaked. Anything above that would have massive implications as it could show that this market is going much, much higher than even the most bullish think at this point.
Regardless of the direction the market takes, high volatility can be expected. Therefore, traders must be careful with their position sizing and carefully consider being aggressive when it comes to adding to their positions. At this point, the market appears to be holding a bullish bias, but all eyes will be on the Federal Reserve statement and the subsequent press conference following the interest rate announcement. These events could provide some early indicators of how the market might behave as a result.
Potential Signal: I’m still bullish on silver. It’s a buy on short-term dips and I’m also a buy on a break above the $24.50 level. The stop would be slightly below the $24 level at $23.88 and the target is the $25.20 level.