We've entered the period where patience is paid generously as it is too early to buy the gold now and too late to buy the flying silver. I don't recommend a countertrend sell as corrections are very tricky and require an extensive experience. It is good just to sit back and watch the price action.
Chart 1. Gold Vs Silver 4H: Huge Divergence
Chart courtesy of tradingview.com
I refreshed the previous comparison chart, which starts from the low in the gold price established on the 10th of March.
Last week the gap between these top metals only widened with silver's gain almost exceeding two times that for the gold. The Gold/Silver ratio dropped severely from the 71.3 oz top (March, 23) to the 68.4 oz close last week losing almost all of the gains achieved in March.
Chart 2. Gold 4H: Watch Fibonacci Levels
Chart courtesy of tradingview.com
At the start of last week gold established a new short-term high at the $1261 mark following a robust silver. It stalled just a few dollars below the previous top ($1264). After that we witnessed the series of lower tops and troughs isolated by an expanding red downtrend in the chart above. This chart formation looks like the large expanding downtrend shown in my November gold post.
The RSI finally played out the accumulated Bearish Divergence falling sharply below the 50 level and sending the price below last week's low to the $1239 level. Currently, this indicator is back above the 50 mark, but it could be just a Dead Cat Bounce before a new drop down.
You should watch the Fibonacci retracement levels where the price can find good support for a new move to the upside. The break above the $1261 level would invalidate the current consolidation plan.
Chart 3. Futures' Gainers In The 1Q 2017: Silver Won…"Silver"
Chart courtesy of finviz.com
Before we get down to the silver chart I would like to show you the broader comparison of the futures to stress the position of silver in the overall market.
The silver is mighty compared not only to the gold, but also to the rest of the futures' market so far this year. As seen in the 1Q 2017 diagram above it scored almost 14% for the quarter and it is the second top gainer among futures and I couldn't resist writing a pun for the chart title that silver won the "silver" medal.
Chart 4. Silver 4H: Watch Support Line
Chart courtesy of tradingview.com
Silver is still on the second move to the upside, which is highlighted by slightly expanding black uptrend. The previous move was sharp with almost a 90-degree strike to the upside, but it was short-lived as such strong moves quickly lose energy.
Silver could hit the upside of the channel as the price is located in the top side of it before we could see the drop of the price to follow gold. The down move would be confirmed by the break below the signal line support. Only after that should you start to watch Fibonacci retracement area for the support clue.
The RSI already has accumulated the Bearish Divergence from lower tops/troughs, but since it keeps above the 50 mark the threat of a drop is yet to be materialized.
Both metals are still in the same range established within the previous top and bottom. However, silver again has something to boast of, this metal triggered the long-term resistance of the Descending Broadening Wedge at $18.05 that started last summer. It is an important confirmation that the long-term correction could be over soon.
Intelligent trades!
Aibek Burabayev
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
4H means 4 hour chart
What does 4H mean in the chart titles? Just curious...
Never mind - probably 4 Hr charts