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Jason Sen

Gold and silver hit major longer-term trendline resistance

Jason Sen
Gold and silver are again testing very important resistance levels. Gold is pushing up towards four-and-a-half-year trendline resistance at around $1275. As I write this morning we have topped out at $1271.50, so we are clearly holding just below this important area.
If you believe the bear trend will continue I would suggest trying short positions in the $1275/1285 area. It is such a strong resistance area in overbought conditions that it has to be worth a try.
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Bulls can only be confident of a sustained breakout if prices move above the April high at $1295. However, a monthly close on Wednesday above $1285 would at least be encouraging for bulls. If we close the week above $1295 bulls could then start to believe we have ended the bear market.
The first target would then be the high for gold on US Election Day when we hit $1337.40, followed by the 2016 high at $1374.91. This is where bulls meet their first major challenge as it coincides with longer-term 38.2% Fibonacci resistance at $1379/1380.

Focus on silver

Silver has four-and-a-half-year trendline resistance at the $17.70/$17.80 area. This coincides exactly with a 200-week moving average so it’s obviously very important. You can see in the weekly chart below that we tried a break above this resistance level in April. However we only managed to close higher for one week before prices collapsed below the red 200-week moving average.
With this market overbought in the short term and on the daily chart there is a strong chance that prices will reverse. It is always worth selling into a short position at such a major resistance area in expectation of the bear trend resuming.
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As it’s the end of the month on Wednesday, a monthly close above $18 would be very encouraging for bulls. But we’d need to see this backed up by a weekly close on Friday above the same level. Bulls really need a two-week close above $18, because we’ve seen what can happen when you only get a one-week close above that very important longer-term trendline. The last time, bears had no trouble regaining control very quickly.
The next level for bulls to beat will be $18.70/$18.75. If we can get through here I would feel quite confident in calling the start of a new longer-term bull market. We could then quite quickly accelerate gains up to the rising one-and-a-half-year trendline and 500-month moving average, around the $21 area.
This coincides quite nicely with the high for 2016 at $21.10. So a push up through here would make bulls very happy with the next target at $21.90/22.15.

Jason Sen

Technical Analyst & Trader
For more information, trading education and offers visit InterTrader
The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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