Silver has earned the reputation of being a “widow maker” among traders, a term not widely recognized but well justified by its notorious volatility and unpredictability. Many seasoned market participants caution against the metal for its frequent fakeouts, high risk and tendency to trap traders at key inflection points.
Despite these challenges, there is a compelling technical case for a bullish setup on the 6-hour chart, where an inverted head and shoulders (IHS) pattern is forming. According to Bukowski’s ranking, the IHS stands at number 13 out of 39 chart patterns, with an average move of 45% and a 71% hit rate for reaching its price target.
To confirm an IHS breakout, one should wait for a strong close above the neckline, ideally, a decisive candle, and higher volume above the $49.34 resistance. The price target for this setup is calculated from the head’s low to the neckline, with silver’s projection aligning at the 0.886 Fibonacci retracement drawn from its all-time high to the head’s low.
Notably, the 0.236 also serves as a reliable support for both the left and right shoulders. A secondary Fibonacci retracement from the Sept. 18 low to the all-time high pins the golden pocket at $45.36–$45.77, the very level from which the pattern’s head has rebounded.
Additionally, RSI has shown bearish divergence at the all-time high and a hidden bearish trend spanning from the left to the right shoulder, which forewarned a short-term downturn that materialized recently. However, there’s still a potential month-long hidden bullish divergence from Sept. 18 to late October that has yet to play out.
Trade Plan
Patience and caution are essential. Silver trades at multi-decade resistance near $50, making breakout attempts riskier but potentially rewarding. Consider risking only a small portion of your portfolio, 0.3R to 0.5R, for this trade.
Enter only after a confirmed breakout above the neckline ($49.34), with a stop below the right shoulder ($46.65) and profit-taking at the 0.886 target (around $53.36) for a 1.5 risk/reward ratio.
A more aggressive entry at $47.70 with a tighter stop below 0.618 ($45.54) boosts RR to 2.63. Both scenarios warrant heavy risk controls, as false breakouts remain a high probability for silver, especially near all-time highs.
Read More: Palladium Price Prediction: A 45% Rally Awaits a Final Pullback
Disclaimer: The content presented herein is for informational purposes only and should not be interpreted as financial or investment advice. While efforts have been made to ensure the accuracy of the information, no guarantees are made regarding its completeness, reliability or suitability for any particular purpose. Financial markets carry inherent risks, and historical trends do not ensure future outcomes. Before making any financial decisions, we strongly advise seeking guidance from a qualified professional. The authors and publishers disclaim any liability for actions taken based on the information provided.
