Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 1.30% and -1.37% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.67% and -0.62% . Friday´s return was -0.70% . Our scoring is currently positive (2 ) for the month-on-month change and 0 for price indexation. This means that in the case of indexation, we are in the last growth phase of the cycle. Both scorings range from -3 up to 3 . The development of the estimated cycles based on our analytical systems is shown in the following chart.
Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the 6 months and the yellow line the annual moving average. XAG/USD broke over the short- and medium-term MAs this month. Therefore, as we can see in the chart below, all MAs still support bullish sentiment.
Since the outbreak of the COVID-19 pandemic, we have witnessed more upward trends that did not exceed 5 consecutive days. Downward trends also did not exceed more than 5 days in the same period. We could use the average annual ATR (Average True Range) obtained from daily data (3.69% ) to estimate Stop Loss orders for our positions. The current value is 2.27% . Approximately 90% confidence interval (return between -3% and 3% ) is shown in the histogram below by a red rectangle.
We could use the last decile of low to high returns (4.50% ) to estimate Profit Targets, as shown in the chart below.
Basic technical analysis points to neutral sentiment in the last week. The XAG/USD is currently very close to the demand zone (green rectangle), where the Fibonacci retracement level of 23.60% is also. In addition, the shorter-term MA has also recently been very close to the spot price and acts as a support. Long-term MA is also approaching the price from below. This scenario could also support the divergence between price development and the RSI, which was created from December to April. However, in the event of a further decline, the psychological level of 25.00 can also be an important support.