In our latest video, we identify if the Silver market is still bearish.
The seasonality reports suggest that the commodity performs well throughout the month of April in line with the USD falling.
But where is the key demand zone, and can we trade to it?
Watch the video to learn more…
Today, we’re going to take a look at Silver (XAG) as we could be looking at downsides in the market.
Yesterday, we talked about the US Dollar Index and the fact that we usually see a top in the market and a downside to the US Dollar during April. However, the price isn’t in that area where I would want to sell the US Dollar yet. Still, there’s potential strength to come from that market in the very short term at least.
The reason why I like XAG short is because the retail sentiment is still suggesting that we do that. We can still see that 93 of retail are long on XAG, and they are adding short positions as well.
The retail sentiment for XAG still shows that the retail market is heavily long despite the short positions increasing. This could suggest that there is more downside to come to this market before the seasonal bias comes through.
That is not a particularly great sign, but with 93% long, there is more to go before this seriously flips to the other side, and we start seeing XAG going long again.
I would rather see them add onto their long positions. But, it’s only 4% now, so it’s not anything great considering that 93% is short.
If I go to the daily timeframe, where does the buy-in start? Well, it starts all the way down at $22.70.
That is where the market starts to impulse to the upside right. Whenever you see an impulse move, that’s usually where institutions have started to buy into the market.
If the seasonal bias suggests that we buy XAG through April, we need to identify an area where significant buying came into the market in the past. The zone at $22.70 saw a significant amount of buying previously and would be an area where institutions could buy into the market. This makes it a good demand zone for buyers to step back in again.
The reason is because it’s such a sharp turn – the market came back up to that zone and sold off again.
So, if there is a continuation in the short-term, I want to be looking for areas of resistance where I could short the demand zone.
Impulse and retracement phases
I’ve identified another high volume area by looking at the impulse from the swing high down to the swing low, which is around $25.
I want to see the price coming up to this 25 level, reject it, then move back to the downside.
Despite the opportunity to buy the market, the short-term trend remains bearish. So, we should still look for the trend to continue into the demand zone. The level at $25.00 saw a high volume of sellers and could offer another short opportunity. If the price reacts to this level, we could see the downtrend continue to the main demand zone below.
So, I’m going to be looking for sellers to re-enter the market at $25.00 and to see if we can get back down to that major demand zone, where we could look to buy in line with the institutions.
Keep an eye on XAG. You still want to watch for some downside due to that retail sentiment. So, let’s see if we get a push back to 25 and go from there.
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