Silver Dubbed ‘The Great Disappointer’ as $37.30 Breakout Looms

Key Insights:

• Silver’s market shows bullish momentum but faces key resistance levels.
• Peter Brandt cautions traders about potential false breakouts in silver.
• iShares Silver Trust performance reflects growing investor confidence.

Silver climbed to $37.04 per ounce on June 17, up $0.65 or 1.77% from the previous day. The move marked a notable gain in a tight market and signaled a bullish lean in investor sentiment.

However, seasoned analyst Peter Brandt urged caution, citing silver’s long-standing tendency to frustrate traders. While the metal appeared to be breaking out, resistance near $41 continued to limit gains.

Technical Setup Points to Critical Levels

Peter Brandt, a Futures market chart trader since 1975, points out that silver’s current price action is forming a key technical pattern. The silver market is moving within a range, showing a rectangle formation between support at $27.50 and resistance at $41.63.

At the current price of $37.60, silver is approaching the upper resistance, creating a crucial juncture in its price movement. Brandt refers to silver as “The Great Disappointer,” reflecting its historical tendency to frustrate traders with erratic price behavior that often does not sustain long-term trends.

This creates a scenario where traders must remain cautious. The market is consolidating, with a “half-mast flag” pattern potentially forming, which is typically seen following a sharp price move. Such consolidation could lead to a rally, should silver manage to break above the resistance level.

Brandt notes that a close above $37.30 would increase the odds of a bullish continuation, confirming a breakout from the current consolidation range. However, traders should be mindful of false breakouts, given silver’s track record of disappointing price action after initial rallies.

Market Indicators Signal Short-Term Bullish Bias

Despite the caution expressed by Brandt, several market indicators suggest that silver’s momentum remains positive in the short term. The moving averages are currently aligned in a bullish pattern, with the 8-day moving average (orange line) above the 18-day moving average (white line). This indicates a market bias toward upward movement.

However, the ADX (14, T) stands at $24.64, which suggests weak to moderate trend strength. To see a stronger trend, the ADX would need to surpass the 25-30 range. This signals that while the market shows a short-term bullish lean, momentum remains subdued.

In terms of positioning, the Commitment of Traders (COT) report shows that large speculators hold relatively strong positions in silver, signaling a bullish sentiment. While the speculative positioning supports an optimistic outlook, the unpredictable nature of silver requires traders to stay vigilant. Despite the bullish sentiment, the market’s range-bound nature and potential for sudden reversals call for careful monitoring.

iShares Silver Trust Reflects Growing Investor Confidence

It is within this backdrop that the largest silver-backed exchange-traded fund, the iShares Silver Trust (SLV) has risen by 23% this year. This growth is a clear sign that more investors are showing confidence in silver and the bulls are moving much faster than the other indices like the S&P 500 and even TSX composite index.

The current performance of the trust suggests that silver can be literally attractive not just where the industrial uses are concerned but also due to the monetary value that it holds especially during periods of economic uncertainty.

The price of the SLV has gone up considerably as it has surged by 14.85% in the last one month. Such a good performance means that the demand of silver related assets is increasing and such a demand is occasioned by the growing market value of the metal.

Notably, the price movement of SLV saw a pronounced surge starting in early June, following a steady increase from late May.

Since breaching the resistance level of $32.00, expectations have arisen of a continued rise in price in case the momentum is kept up. Silver is reflecting a bullish trend with investors moving in, since strong performances are seen with silver-encompassing products like the SLV to continue on with its bullish behavior.

Disclaimer

This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.