Since breaking out of the long term down trendline in July, Silver has climbed more than 30%. But Silver quickly formed an inverted hammer candle on the weekly chart. An inverted hammer is a bearish reversal candlestick pattern that occurs after a price advance and hints at the reversal of an uptrend.
Yesterday, President Trump said he and President Xi Jinping will have a signing ceremony to sign the first phase of the U.S.-China trade deal agreed to this month. As part of this Phase One agreement, the U.S. will suspend tariffs that were planned on $160 billion in Chinese imports. In return China will purchase an unspecified amount of American products. Happy days ahead right…not so fast.
Last month, President Trump signed two bills meant to support human rights and pro-democracy activists in Hong Kong. The immediate cause of the protest was the proposed legislation of the 2019 Hong Kong extradition bill. However, other causes have been pointed out, such as demands for democratic reform, the Causeway Bay Books disappearances and the fear of losing a "high degree of autonomy" in general.
The proposed change is the latest in a series of moves by China under President Xi Jinping that are viewed as chipping away at Hong Kong’s autonomy, including barring some activists from seeking elected office, prosecuting protest leaders and banning a pro-independence political party.
Chinese officials had hoped Trump would veto the bill, but that didn’t happen.
Tensions between China and the U.S. rose over the weekend, but this time it was not over trade differences. Rather, China is upset with the defense bill that the U.S. Senate passed by an overwhelming majority. On Saturday, the Chinese government expressed its “strong dissatisfaction” with the defense bill, charging that the U.S. was interfering in China’s internal affairs.
The sharp Chinese reaction has triggered gains in safe-haven gold and silver in Monday trading. Still, the Chinese may have to grit their teeth and suffice with verbal retaliation. President Trump has shown that he is a tough negotiator, and the Chinese are unlikely to take steps that will hinder further progress on the trade front, after concluding a limited trade agreement with the U.S. earlier in December.
Now I thought price as going to pull back all the way to the weekly demand near $15, as that was the origin of the breakout.
However, I just noticed a major resistance/support band right above $16. This, the chart suggest $16 is the floor in Silver for the time being and if things turn a bit sour in the equity markets in 2020, expect price to retest the 2019 highs.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.