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Silver setting up the next move

Commentaries & Views

Silver is consolidating in a bullish flag formation, shown below on the 3 hour timeframe:

On the daily timeframe, momentum is in the oversold position; given the upward trend, in my opinion the probability remains that bulls will step in to drive momentum back up along with price, resulting in a break out to the upside of the flag.

Note how the entire flag formation is occurring above the long shown (for regular readers) highlighted yellow box.

ATTENTON: This could play out in textbook fashion with an upward breakout, retest, and follow through – but as hardened metals traders and price observers certainly know; a false breakout or breakdown from consolidation patterns is a common occurrence in this market. Reversals of false breaks are usually a strong signal that price will follow through in the reversal’s direction.  IE: should price breakdown from the flag and quickly reverse – that is a strong signal that price will continue higher, and vice versa.

I noted Monday a 25bp hike from the FED next week is quasi guaranteed; will Powell call the end of the rate hike cycle in lieu of a pause? In my opinion that is also quasi guaranteed. The question is whether his rhetoric will match or exceed the dovishness he communicated during the last FOMC meeting.

As one regular reader paraphrased "triangles like to break to the upside". S&P futures shown again below; similar to the call on silver weeks and weeks back– I think that if the index gets into the yellow, the top of the box will be tested.

If nothing else, brace for upcoming volatility.

Have a great weekend.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.