Silver futures traded on the Multi Commodity Exchange (MCX) surged 5.5 per cent forming a bullish engulfing candlestick pattern in the weekly chart last week. This pattern is a bullish reversal which has short-term bullish implication. Moreover, the relative strength index on the weekly chart has displayed a positive divergence indicating that the contract is on the brink of a trend reversal. After hitting a low of ₹32,626 a kg on December 1, the contract has been on a near-term rally.

While trending up, the contract has breached its 21-day moving average recently. But, it was then testing resistance at ₹36,700 levels. The relative strength index on the daily chart is on the brink of entering the bullish zone from the neutral region and the weekly RSI has entered the neutral region from the bearish zone.

On Tuesday, the contract surged 2.8 per cent to ₹37,620 (price at 7pm) and appears to have breached the key immediate resistance level of ₹36,700. This rally has reinforced the near-term bullish momentum which can take the contract higher to ₹38,000 and then to ₹38,800 in the short-term.

Traders with a short-term perspective can consider buying the silver futures contract while maintaining a stop-loss at ₹36,500 levels. Next key medium-term resistance levels to note are pegged at ₹39,500 and ₹40,000 levels.

On the downside, the contract has a significant immediate support at ₹35,000 levels. A decisive fall below this levels can pull it down to ₹34,000 levels initially and then to ₹33,000 levels in the short-term.

Note: The recommendations are based on technical analysis. There is a risk of loss in trading.

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