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Silver moved close to the $25.00 level at the start of the trading week as the fundamentals behind the metal continue to improve after last Friday’s lacklustre jobs report.
The shiny metal had fell to a new yearly price low last month, with silver moving towards the $22.20 level, marking levels not seen since April of 2020. Traders are paying close attention to the near $3.00 price recovery from the August low as the technical and fundamentals do look very good.
One big issue that I have had with the silver long trade is retail trading sentiment. The ActivTrader market sentiment tool has been showing retail traders have been in the 80 to 90 percent bullish range for month.
With so many retail traders expecting higher prices it has been particularly hard for a meaningful and sustaining price recovery to take hold, as retail traders are often on the wrong side of the trade or have poor market timing.
This has been an issue for me over the summer, as I have not fully believed a rally in silver back towards the $30.00 level could take hold again without the retail crowd actually turning bearish towards the metal.
Interestingly, things are starting to change. The ActivTrader market sentiment tool now shows that around 72% of traders are bullish towards the price of silver, marking close to a 20 percent weekly price drop.
Should we start to see sentiment neutralised, or actually turn net bearish, it may be time to look at the metal again and get in position for a potential journey back to the $30.00 area.
Silver short-term Technical Analysis
The short-term technicals for silver shows that a large rising price channel. These patterns often signify large price ranges before an eventual and powerful wedge breakout.
According to the size of the pattern we should expect a price range of around 23.70 to 25.80 over the short-term before an explosive upside breakout finally takes hold for the popular metal.
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Silver Medium-term Technical Analysis
The daily time frame still shows that huge cup and handle pattern formation is present, with the price of silver still trading in the medium-term sweet spot for a big price reversal as the pattern is still very valid.
Cup and handle patterns are known to be explosive price patterns that take time to play out to the upside. Patience may be required before we actually see this pattern ignited, which I suspect we finally will this Autumn.
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