Last week was a more positive one for silver which finally found some much needed upside momentum following the recent bearish picture on the daily chart, with the metal closing the sesssion ahead of the three day holiday at $19.36 per ounce. Nevertheless, it was interesting to note that silver speculators on the latest release of the CFTC COT report have cut their net long positions by almost 5,000 contracts to 74, 158 at the end of August. This was also reflected in gold, with the same group cutting their net long positions by almost 27,000 as bearish sentiment continues to weigh in the metals complex, whilst simultaneously dramatically increasing their net short positions for copper.
From a technical perspective, the weakness for silver was first signalled on the candle of the 5th July, with the dramatic increase in volume and deep wick to the candle telling its own story – massive insider selling on volatility which was duly confirmed with the ATR volatility indicator. The metal duly traded within the range of this candle as expected with the volume point of control ( the yellow line) now resting firmly in the $20.20 per ounce area, and weiging heavily on the currenct price action. Since then, the platform of support in the $19.50 per ounce areas has been breached on rising volume, but last week’s rally has seen this region revisted once again.
However, with volumes on the uptrend remaining light, this now looks increasingly difficult to breach and will require sustained and rising volume to see this penetrated in any meaningful way. To the downside, the platform of support built last week in the $18.50 per ounce area is now increasingly significant and if broken, will then open the way to a test of the next level below in the $17.80 per ounce area, with the low volume node immediately above.
Finally, the trend monitor continues to remain red on this timescale, and confirming the current bearish picture.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading