Gold and silver hit major longer-term trendline resistance
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.
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.
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.
Technical Analyst & Trader
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