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 -1.16% , well below the first standard deviation. Our scoring is currently slightly positive (1 ) for the month-on-month change and 1 for price indexation. Both scorings range from -3 up to 3 . Indexing is currently on its way north. The development of the estimated cycles based on our analytical system is shown in the following chart.
Source: WALFIR
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 fell below short-term and long-term MAs last week. Therefore, as we can see in the chart below, all MAs support bearish sentiment.
Source: WALFIR
Since our last analysis, there have been more declining trends, with a maximum of 5 consecutive days. The total maximum for the downtrend for the last 3 years is 8 days. Upward trends have not exceeded more than 3 consecutive days in recent months. The total maximum for the last 3 years is 6 days. We could use the average long-term ATR (Average True Range) obtained from daily data (3.30% ) to estimate Stop Loss orders for our positions. The current value is 1.94% , which is below the average value. Approximately 90% confidence interval (return between -3.0% and 3.0% ) is shown in the histogram below by a red rectangle.
Source: WALFIR
We could use the last decile of low to high returns (4.50% ) to estimate Profit Targets, as shown in the chart below.
Source: WALFIR
The basic technical analysis points to neutral sentiment in recent months. XAG/USD is currently very close to the psychological level of 25.00 . In addition, it is in the demand zone (green rectangle), where are also the Fibonacci retracement level of 23.60% and the long-term moving average. The divergence between price development and the RSI could also motive short-term bulls. In the event of a further decline below the demand zone, bears could push the price to 22.00 or even close to the psychological level of 20.00 .
Source: TradingView
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