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Silver rallied by over five percent on Thursday as the shiny metal came to life amidst a flurry of speculative bets and increased trading volume. Data also showed that silver was officially the fourth most traded asset class in the world on Thursday.
In terms of what drive the move higher, trading forums were a buzz prior to the breakout that a major move was about to take place. Wallstreetbets, the popular trading forum that drove the wild moves in GameStop and AMC earlier this week was reportedly one of the influencing factors behind the move as retail traders apparently took on the metals market.
This is an interesting new development, and something to watch closely, especially since many traders on Wallstreetbets consider silver to be undervalued at current levels. Whether forum participants can continue to drive silver price higher from current levels remains to be seen.
It is also noteworthy that huge speculative bets were placed towards silver last week. These bets were placed both on the spot and futures market from hedge funds, and certainly hint that higher silver prices may be coming.
The fundamentals are certainly in place for further gains in silver prices, especially with US stimulus pending which is expected to be dropped into the US economy as soon as February. The Federal Reserve also indicated that they have no intention in reducing QE purchases during this week policy meeting.
Technical analysis is also exceptionally bullish for silver at the moment, especially the long-term technicals. Volume is often a good indication of buying interest, and the silver spot market saw a strong pick-up in trading volumes as silver price broke towards $27.00.
According to the ActivTrader Market Sentiment tool traders still remain bullish towards the silver, with sentiment getting stronger as price rise. Silver pulled back from $27.00 as sentiment reached peak euphoria yesterday, at 72% positive.
This is a potential red flag, and if silver fails to make new highs above $27.00, then a larger correction could be on the horizon, to squeeze the retail longs who entered around the weekly highs.
Silver short-term Technical Analysis
In terms of short-term technicals, the trend remains bullish on the four-hour time frame while price trades above the $25.80 level. This is the key area that bulls need to defend going forward.
The Williams Accumulation Distribution indicator remains bullish. This indicator and is a key measure of trading volume and highlights that yesterday’s sudden breakout took place on rising volumes.
Typically, valid breakout moves are characterized by higher volumes, as it shows genuine and real buying interest. The only concern is the short-term is a potential head and shoulders pattern.
Source by ActivTrader.
Silver Medium-term Technical Analysis
According to the daily time frame bulls need to clear the $28.00 level to really accelerate technical buying towards silver. Gains above this level could see the $28.00 and $29.40 level quickly tested, although $30.00 is absolutely key resistance.
The bigger picture for silver continues to show a huge cup and handle pattern. If this bullish price pattern plays out to the upside it should cause a parabolic move towards the $36.00 and $42.00 levels.
Cup and handle patterns are considered to be amongst the most bullish pattern. As things stand, the bull case looks strong while the daily candle closes above the $25.80 level.
Source by ActivTrader.
