"Head and Shoulders Bottom" Reversal Pattern Confirmed

Eva Chen

Summary:

Silver prices have risen to $29.00 despite traders reducing bets on a significant rate cut by the Fed.

BUY XAGUSD

EXP

EXPIRED

29.400

Entry Price

31.500

27.700

79.022 -0.257 -0.32%

Pips

EXPIRED

27.700

31.695

Exit Price

29.400

Entry Price

31.500

Fundamentals

Silver prices broke through the key resistance level of $29.00 on Thursday during the New York session. Although investors seem to believe that the Fed will gradually lower interest rates by 25 basis points to 5.00%-5.25% this month, silver prices have risen slightly.

With the US August Consumer Price Index (CPI) data released on Wednesday showing that inflationary pressures persist, market speculation about the Fed making significant cuts to its key borrowing rates has largely diminished.

Especially following the release of US August Producer Price Index (PPI) data, gold prices surged past $2,550, hitting a new high. However, due to positive market risk sentiment, which has dampened investor enthusiasm for safe-haven assets, silver prices have only risen moderately without a strong push.

We expect that as gold prices break out of their consolidation range, a long-term uptrend will emerge, helping silver prices rise in tandem, as they both belong to the precious metals category.

Currently, silver futures for December have both bulls and bears generally at the same technical level. The next upward price target for silver bulls is to close above the solid technical resistance level at the August high of $30.67. For bears, the next downward price target is to close below the solid support level at the August low of $26.88.

In the short term, the first resistance level is at $29.55, followed by $30.00. The next support level is at Wednesday's low of $28.39, followed by $28.00.

"Head and Shoulders Bottom" Reversal Pattern Confirmed_1

Technical Analysis

Silver prices have been fluctuating within a limited range of $27.70 to $29.20 for over a week, with upward movement constrained by the 200-week SMA. As silver prices rose during the New York session and broke through the key neckline, the uptrend is expected to continue.

However, given that oscillators are just beginning to gain traction but have not yet confirmed a bullish bias in the daily chart, we believe there may be a need for a pullback to confirm the pattern's formation.

On the upside, a break above the $29.65 level will confirm the upward momentum, potentially reclaiming the psychological level of $30.00. Above this level, bulls may target the August monthly high of around the $30.20 range.

On the downside, $28.25 could act as support before any further decline to the $28.00 level.

Overall, silver has attracted buying interest for three consecutive days, setting a new weekly high on Thursday. However, the lack of follow-through buying and mixed technical indicators suggest bulls should remain cautious. The asset requires a structural adjustment to support further upside potential.

Trading Recommendations

Trading Directions: Buy

Entry Price: 29.40

Target Price: 31.50

Stop Loss: 27.70

Valid Until: Sep 27, 2024 23:55:00

Support: 29.17, 28.88, 28.52

Resistance: 29.65, 30.18, 31.06

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