- Reddit day-trader-led silver frenzy stalls on Friday.
- Technical set up on daily chart remains in favor of the bulls
- XAG/USD could see the ‘buy the dips’ strategy in play.
After surging nearly 7% to test the $27 mark on Thursday, Silver (XAG/USD) is on a corrective mode so far this Friday as the dust settles after the Reddit day-traders induced market craze. Reddit Group’s WallStreetBets hogged the limelight once again after the day-trader favorites GameStop and other stocks tumbled on brokers', including Robinhood Markets Inc., announcement of a ‘reduce-only mode’ in these US stocks to favor the hedge funds.
r/WallStreetBets board, famous for fuelling a short squeeze in Gamestop, diverted retail attention to Silver, by posting that the white metal is highly manipulated and a short-squeeze to $1000 per troy ounce cannot be ruled out, courtesy of the big banks such as the JP Morgan. The day-traders pumped into iShares Silver Trust, the largest silver exchange-traded fund, which rose as much as 6%.
Silver futures are seeing some downward pressure this Friday, as Robinhood said that it would lift trading restrictions on some of the blocked stocks, which prompted a rally in the day-trade favorites once again in after-hours trading. The revived interest in these US stocks could likely limit the upside in the bright metal, although the risks remain skewed to the upside amid a favorable technical set up. Markets could adopt the ‘buy the dips’ strategy as silver’s options market suggests a bullish mood.
“Silver's call skew on Comex, which measures the spread between prices for calls and puts, surged to a multi-month high of 21.2545 on Thursday, as investors added bets (calls) to position for a rally in the semi-precious metals,” Omkar Godbole, FXStreet’s Analyst noted.
Silver Price Chart - Technical outlook
Silver: Daily chart
Silver’s daily chart looks constructive in the near-term, having confirmed an inverse head-and-shoulders pattern on Thursday after the price stormed through the neckline resistance, then at $26.20.
XAG/USD pierced through the critical 21-daily moving average (DMA) while the Relative Strength Index (RSI) saw a spike, both adding credence to the upside break.
At the moment, the price has reversed to test the neckline resistance now support around $26.20. Should the correction pick up pace, the 21-DMA at $25.86 could be threatened.
The buyers remain hopeful so long as the XAG bulls defend the abovementioned critical support. Further south, the upward-sloping 50-DMA at $25.17 could come to their rescue.
Alternatively, Thursday’s high of $26.97 could be tested if the rally resumes, opening doors for a test of the horizontal trendline resistance (orange) near $27.70.
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