Taking support at around ₹33,500/kg in the previous week, the silver contract traded on the Multi Commodity Exchange (MCX) surged almost 3 per cent on Monday. It has breached its 21-day moving average on that session. This reversal is backed by a positive divergence in the daily relative strength index. The contract now tests a significant resistance level of ₹35,000 by trading around ₹35,132 levels on Tuesday. A strong rally above this resistance will have a limited upside till ₹36,000 which is another key medium-term resistance level. Traders with a short-term perspective can initiate long position on a strong rally above ₹35,000 with a fixed stop-loss at ₹34,900 for a target of ₹36,000.
However, the medium-term downtrend will remain intact as long as the contract trades below the trend deciding level of ₹37,000. An emphatic breakthrough of this level will pave way for an up move to ₹38,000 in the medium term. Having said that, inability to move above the resistance level of ₹36,000 will keep the contract moving sideway between ₹34,000 and ₹36,000 for a while. Next support below ₹34,000 is at ₹33,500.
On the global front, the spot silver ($15.27/ounce) surged 2.5 per cent on Monday, breaching a key resistance level at $15. The commodity has moved out its narrow sideways movement by breaking upwards. This up move is also triggered by positive divergence in the daily indicators. However, the metal faces an important resistance at ₹15.5. A conclusive breakout of this level will strengthen the up move take the silver price higher to $16 in the near term. Supports are at $15 and $14.5.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
