Silver Prices Give Back Gains, But The Trend Remains Bullish

Talking Points

• Silver prices may try to carve out a low at current levels as the risk/reward ratio has tilted to be in favor of bullish traders.
• The short-term trend is bullish above the March 3 low of $14.87.
• U.S. Wholesale inventories are on tap in the U.S. session and may spark some Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term in silver prices.

Silver prices have now corrected 50% of their gains from the February 29 low of $14.6 and as the short-term trend defining level for most traders is the February 29 low of $14.6, or in my case the March 3 low of $14.87, the risk/reward ratio and trend is now favoring bullish positions.

In other words, it would not surprise me if silver prices try to carve out a low at current levels over the next few days. The exact range I am looking at is the $15.09 to $15.36 range, which are Fibonacci retracement levels. Please see the chart below.

Following a potential failure to bounce at current levels and a breach to the March 3 low of $14.87, there is a heightened risk that price may turn bearish and therefore trade lower. If this occurs, I would expect bullish traders to head for the exit.

U.S. Wholesale Inventories

In the afternoon, U.S. Wholesale inventories are expected to decline by -0.2% MoM and may move silver.

An interesting statistic published in the same report is that of Merchant Wholesale Sales, which measures sales and its YoY change to give us a hint of where the economy may be heading. The last reading showed sales contracting by 4.5% YoY and an even lower reading today may boost silver, as it suggests that the economy may be slowing further. A less severe contraction than 4.5% YoY may suggest an outcome to the opposite effect.

See the DailyFX Analysts' 1Q forecasts for the Dollar, Euro, Pound, Equities and Gold

Silver Prices | FXCM: XAG/USD

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00

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By: Alejandro Zambrano, Market Analyst