After breaking the short term trendline support, Silver is now threatening the long term channel support. The precious metal is showing some real downside risk, a bearish breakout through the trendline might result into the fresh lows of 2014.
As of this writing, the white metal is being traded around $19.39. A hurdle may be noted around $19.68 which is a confluence of the 23.6% fib level and trendline support turned resistance. A daily close above the trendline resistance will push the pair again into bullish momentum, opening doors for the $22.00 resistance area in the medium term.
On the downside, the pair is expected to find a support around $19.24 that is the long term channel support. A break and daily closing below the channel support will open doors for the double bottom support area below $19.00. It is however pertinent to mention here that the recent supply concerns about Silver might keep the price supported near the $19.00 area.
Today HSBC Holdings is due to release the Manufacturing Purchasing Managers Index (PMI) report for China. According to median projection of different analysts, the PMI increased modestly to 48.4 this month as compared to 48.0 points in the month before. Generally speaking, a reading above 50 points shows expansion in the manufacturing activity and vice versa, so better than expected actual outcome will be seen as bearish for Silver.
Keeping in view the supply concerns relating to Silver and overall macro-economic outlook, there could be two strategy to trade Silver. First, buy the precious metal near the channel support, keeping the stop loss just below the trendline. Secondly, consider buying near the double bottom support area.