Trade Recommendation: Silver/ZAR

The Silver/South African Rand pair (XAG/ZAR) lost its bullish momentum in September 2016 when it posted a lower high of 282.48. This was a signal to participants that the uptrend has come to an end. Things took a turn for the worse when the pair broke support of 260 in October 2016. The break below the crucial support triggered the rounding top reversal pattern on the weekly chart.

As a result, market participants dumped positions to protect their capital. XAG/ZAR generated a series of lower highs and lower lows until it bottomed out at 190.78 in February 2018. In about a year and a half, Silver lost over 32% of its value against the South African Rand.

At this price level, the pair began to show signs of reversal. First, a long bullish divergence was spotted on the daily RSI. In addition, the market printed a higher low of 191.27 on March 28. These were reliable signals that bulls were out to play.

The pair has been rallying since. This could be your chance to buy the breakout.

Technical analysis show that the Silver/South African Rand pair has taken out resistance of 214. This triggered the rounding bottom reversal pattern on the daily chart. The breakout was affirmed by a strong rally to 222.80 on June 11.

However, XAG/ZAR is extremely overbought and the daily candle is detached from the 4-day, 8-day, and 21-day moving averages. These indicators tell us to expect a dip in the near term.

The strategy is to buy the dip as close to 214 as possible. As long as bulls stay above this level, they will attract all the momentum they need to move to our target of 236.

The process may take more than three months.

Daily Chart of Silver/South African Rand

As of this writing, the Silver/South African Rand pair (XAG/ZAR) is trading at 221.61.

Summary of Strategy

Buy: As close to 214 as possible.

Target: 236

Stop: Close below 210.

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.