XAG/USD tumbled yesterday, breaking below the prior key support of 16.32 and thereby completing a short-term double top formation on the 4-hour chart. The slide also confirmed the negative divergence between both of our oscillators and the price action, but was eventually paused at 15.93, near the low of July 18th. All this suggests that the white metal may continue drifting south for a while more.
If the bears are strong enough to overcome the 15.93 barrier, then we may see them pushing the price towards the 15.68 area, which is defined by the inside swing high of July 16th. If that zone is not able to withhold the selling pressure either, its break may extend the slide towards the low of the day after, at around 15.50, or the upside support line drawn from the low of May 28th.
Shifting attention at our short-term momentum studies, we see that the RSI dipped below 30 and continues to point down, while the MACD lies below both its zero and trigger lines, pointing down as well. These indicators detect strong downside speed and corroborate our view for some further near-term declines.
On the upside, we would like to see a strong recovery above the double top’s neckline, at 16.32, before we abandon the short-term bearish case. Such a move could encourage the bulls to aim for the 16.60 or 16.65 key resistance levels, which mark the ceiling of the aforementioned double top. That said, we would like to see silver surpassing those hurdles before we start examining whether the outlook has turned back positive. This would confirm a forthcoming higher high on both the 4-hour and daily charts and could initially aim for the 16.80 barrier, marked by the inside swing low of June 13th, 2018.
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