Silver, on a 1-hour timeframe, has been trading in a steady uptrend since 13 November 2023 after the market broke out of an extended range. Some strong and repeating technical patterns characterize the XAGUSD pair. Firstly, it is evident that the moving averages form a significant dynamic support and resistance. We have the 20 SMA (20-period simple moving average) in red, the 100 SMA in blue, and the 200 SMA in yellow. In November alone, we had 11 significant touch and reverse points on these moving averages (depicted in red circles).
Another technical solid pattern that can be found in silver is a triangle breakout. This happens when we find contracting price movements, usually coupled with diminishing volatility (as depicted by the AR indicator at the bottom of the graphic. This sets the stage for strong breakouts since low-volatility periods are usually followed by high-volatility periods. Fundamental factors usually trigger breakouts, as investors halt trading before the market gives clear direction.
One such example can be found on 24 November. The market started forming a classical triangle, coupled with reduced volatility, reaching a low of 0.042 on the ATR. This was followed by a convincing breakout with a strong bullish candle and, subsequently, another up move that lasted for 3 days, plotting Silver 5% higher.
Today, 30 November, is again a day filled with many market-moving news, including:
- 10:55 GMT+2: Germany unemployment change
- 12:00 GMT+2: Eurozone Core inflation YoY Flash
- 15:30 GMT+2: Core PCE Price Index YoY
Strong releases here trigger a breakout of the current triangle that formed. Although, one must be careful, simply for the fact that there are a few releases. Investors are sometimes caught in the trap of jumping on the move of the first release, just for the market to strongly reverse on the second release, creating a bull or bear trap for investors. It is crucial to wait for a convincing breakout to avoid being caught in false breakouts, also known as takeouts.
From a technical point of view, the market seems ready for a strong move after the triangle formation and the ATR currently plotting at 0.096. In the case of a convincing breakout to the upside, which would align with the longer-term trend, we might see the bulls push the price to the 25.194 level and beyond, even reaching the 25.909 resistance level.
If the market breaks out to the downside, we might reach 24.735 or get a retest of the 100 or 200 SMA since this has, in the past, proven to be a strong dynamic support and resistance zone for price.
This day, with its many news releases, will probably be the trigger for some action in the market, with agreeing fundamentals driving strong price trends and momentum.
Summary:
- The overall trend is to the up-side.
- The 200, 100, and 20-period SMAs are well-respected dynamic support and resistance.
- We are currently in a triangle formation with lower volatility, which signals the strong possibility of a breakout.
- There are significant news releases scheduled for today, which might be the catalyst for a strong breakout followed up with momentum.
- In the case of a bullish breakout, the targets might include 25.194 and 25.909.
- In the case of a bearish breakout, the targets might include 24.735 and the 100 or 200-period SMA.
- It is vital to wait for a clear direction and a convincing breakout of the triangle.
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