Fan Yang
All posts from Fan Yang
Fan Yang in Fan Yang,

Medium to Long-term Silver Trading Ideas

Silver has been bearish for a while now. Since blasting to the upper 40s in 2011, XAGUSD has been retreating. Between 2011 and 2013 26.0 was a key support level. After a break below that, the market fell sharply to the 18-18.50 area. During 2013 and 2014, the 18-18.50 area was a key support area. After that broken, price came down 14.00, which is the key support from late 2014 to the present.

Silver (XAG/USD) Weekly Chart 9/29
(click to enlarge)

The weekly chart above shows that the dips have been declining in volatility since the 2011 one. This is what a simple technical perspective would say. 

1) Silver is officially in a short secular bear market (5-25 years).
2) The trend appears to be intact, but slowing. 
3) 9-10 appears to be a very important support, though we also have some historical pivots in the 12-12.50 area. 

The strength of prevailing downtrend suggests further downside ahead. However, the decline in volatility suggests we should limit our bearish outlook. If a break below 14.00 sends silver price down, I would conservatively target 12.50, maybe 12.00 and keep it as a medium-term (one to a few months) projection.

IF price does push towards 10, I would look for support, but expect an increase of volatility. Volatility goes throughout phases. And sometimes sudden change in volatility coupled with strong support can provide some buying opportunities. Because of the prevailing downtrend and the possibility of extending it below 9, we should limit our bullish outlook in case we buy into a mere correction swing. The 14-14.50 area might be a conservative target, with the 17.50-18 area as an aggressive target (for a more buy and hold strategy in a couple of quarters to a couple of years time horizon).

Just don't get lulled into thinking the volatility is low and make your stop-loss decisions with consideration of possible return of some wild swings that can cut you up. (I am speaking from experience here, and encourage you to let me know about your experiences, particularly on silver, and buying markets against the trend.)