Good morning team.
The pullback on metals occurred overnight as expected, and highlighted in the member’s video yesterday.
We are now looking to position on SILVER and build a trading plan moving forward. We need to be prepared for both a bullish and bearish scenarios playing out.
What is driving metals?
- Unlimited money supply coming from the FED and US Government.
- Uncertainty in the market with fears of inflation still lingering due to the endless money printing.
- Joe Biden will appoint Jannet Yellen to Treasury Sec (if he becomes President). Jannet Yellen is all in on the money printing and currency devaluation.
- Democrats want a larger stimulus package, if they take the Senate it becomes a possibility of playing out.
- Uncertainty around the US election, if the Electoral College fails to recognise Joe Bidden as the President the USD could face a reversal due to risk-off sentiment. This would result in selling pressure across commodities and equities.
- The Senate blocking further stimulus from the US Government could see some downside on metals due to less USD supply.
- The FED pulling the pin on QE (quantitative easing), which is unlikely at this stage.
SILVER 4 Hour Charts
SILVER – 1 Hour Charts
The 1 hour charts are showing an impulsive 5 wave structure higher, based on Elliott Wave theory we may now see another bullish 5 wave structure higher. We can also see a tag on the pennant trend line and an inverted head and shoulders formation in play. If the bullish scenario plays out we can expect a move towards the 26.00 levels.
A key level we need to be aware of is the 24.30 resistance. This is also a possible head and shoulders formation. If the US Government fail to reach an agreement on a stimulus package we may see further downside on metals and equities due to a stronger USD.
We are entering a slightly smaller long position in the market now. Once the market reaches the 24.30 resistance we will move our SL to the open price in case of the bearish head and shoulders formation playing out. Our plan with this initial position is to let it run for a longer time frame.
Trade Setup: BUY Market Execution, current price 23.90, stop loss 23.25 and take profit left open.
Stop loss: 65 pips
We will be looking to add a second position once the market clears 24.60.
If we see a bearish reversal at 24.30 we will be looking to enter a short position on the break of the neckline at roughly 23.90. Our long trade will be taken out at break even.
If you have any questions on the setup or position sizing jump in the live chat on the trading floor.