Silver continues to be in a defensive position close to a one-month low that was reached on Monday. The current environment is favorable for pessimistic traders and lends credence to the possibility of more losses. Any effort at recovery that moves the price over $19.00 is likely to be sold into by investors.
On Tuesday, silver prices struggle to make any headway, and the precious metal is still trading within striking distance of a one-month low that was reached the day before. The precious white metal is trading in the neighborhood of $18.70 at the moment and is susceptible to a prolongation of its present downward trend that has been seen over the course of the previous two weeks or so.
Acceptance below the $19.00 level lends credibility to the short-term negative view for the XAG/USD currency pair. This is because of the failure that occurred last week around the 200-period SMA on the 4-hour chart. In addition, the technical indicators that are shown on the daily chart are not even close to being in the oversold zone, despite the fact that they are still located inside the negative zone.
As a result, a further decline toward retesting the low point reached for the year, which was in the region of $18.20–15 on July 14th, seems to be a real possibility. This is closely followed by the round-figure level of $18.00, which, if broken strongly, will be considered as a new trigger for bearish traders and lay the scene for an additional move in the opposite direction of the current one.
The probable bear flag price pattern that has developed on the daily chart during the second half of the month of August shows that there is a clear probability of additional downside, with a first target at the 61.8% extension of the flag pole at just below the YTD lows, which is about $18.05.
On the other hand, any effort at recovery is more likely to meet with severe resistance and draw new selling at the $19.00 level. This is due to the fact that the market is already overbought. On the 4-hour chart, this should put a ceiling on the Silver price at the 200-period SMA. The aforementioned barrier is estimated to be located somewhere in the vicinity of the $19.45–$19.50 zone, which ought to now serve as a turning point.
The near-term bearish bias will be neutralized if there is sustained strength beyond, which will also drive some short-covering action. The Silver (XAG/USD) pair may then seek to overcome an intermediate barrier located around the $19.80 area, with the ultimate goal being to recapture the psychological level of $20.00.