Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Last week, we sent the technical analysis of Gold and Silver, where we pointed out the key support/resistance levels and noted that the next price swing is more likely to be down than the up. At the same time, we must keep in mind that both metals are capped in a tight trading range for the past month or so, and, as you probably know, nothing can be claimed to be high probability when it’s trading in a range.
In line with this, we suggest waiting for the support breaking before thinking about selling Gold or Silver. A break of the support zones would trigger the short setup, which is then likely to progress lower relatively quickly.
Watch the newsflow on new US COVID-19 relief stimulus
Also, the right fundamental circumstances need to occur to fuel such a downside move in Gold and Silver. The obvious one is the discussion between Democrats and Republicans for a new coronavirus stimulus bill in the US. A risk-off reaction across markets is likely if a new stimulus bill is not approved by US congress soon.
In the case of Gold and Silver, the risk-off reaction is likely to take them down too, particularly given the still stretched long positioning in both. Something similar happened in March, the metals initially plunged but then recovered together with other markets. So don’t expect anything more than a tactical correction down in Gold and Silver, which would likely be followed by a strong rebound from one of the support areas lower we highlighted in
last week’s newsletter.
Wait for XAG/USD support to break
Short Gold is also likely to be a good trade if this setup is triggered, but the Silver setup looks cleaner on the charts. Hence, it’s a preferred option. Additionally, Silver tends to drop more dramatically (when it does) than Gold, so the profit potential is also likely to be higher on a short Silver trade.
The $19.50 - $20.00 area is a distinct target to the downside. Last week, we discussed that this is a crucial and strong support. The support trendline of the downward channel meets with the 200-day moving average (red line). Furthermore, the shallow retracements after the first two steep legs down also suggest more downside is in store.
In the sense of a breakout lower in Silver, the advantage is that there is no other distinct support before this area, which should help to drive a steeper and faster decline.
Note: the $22.50 area is moderate support ahead of $19.50 - $20.00, but is unlikely to hold if this $24.00 support breaks.
As can be seen on the chart above, Silver is currently trading in a smaller rising channel (corrective). The support of this corrective formation stands around the aforementioned $24.00 level. A clean breakout below it should clear the road for a decline below the $22.50 lows and
then our target at the $20.00 area.
Entry:
- Wait for a break of the support trendline of the ascending retracement channel in the $24.00 zone (see chart); or
- This short setup will be canceled if Silver moves above the 55-day moving average at the $25.60 price zone (blue line on the chart)
Stop loss:
- Place the stop above the entry pattern;
- It is recommended to place it above the most recent high on the daily chart (if and once a bearish breakout happens)
Target:
- 1st: $22.50 moderate support; unlikely to hold in a bearish scenario, however, it may as well happen, considering the strong bullish outlook for Silver in the long-term; therefore, some profit taking here at $22.50 makes sense
- 2nd: $19.50 - $20.00 area as described above (see chart)
Trade signals from the past week
TOTAL: 0 pips in the past week
TOTAL: +3055 pips profit since October 1, 2018
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Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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