Since putting in a 52-week high in August 2013, preceded by a longer-term downtrend, silver (symbols SI and mini contract YI) has been confined to a triangle pattern consisting of lower swing highs and similar swing lows.
The June rally pushed the price into the resistance zone of the last swing high -- typical of these patterns -- but was unable to break through it, which would have signaled an upside breakout. Mid July and early August sees the price drifting below short-term support, indicating a continued move toward triangle support at 19 to 18.50.
Figure 1. Silver Futures Daily Chart (SI - September Contract)
Based on the most recent wave high in July the new triangle resistance zone is between 21.59 and 20.81. A move above this region signals a break of the triangle and the emergence of a potential uptrend.
Long-term and short term forces are currently bearish. The triangle support has proven resilient and should be respected though.
The triangle is big enough to use support and resistance areas for short-term trading purposes; but if major triangle support or resistance is broken, both long and short term traders should take note since it could mean a major trending wave up (break higher) or down (break lower) is unfolding.
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