Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 1.30% and -1.36% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.67% and -0.62% . Friday´s return was -0.50% , well below the first standard deviation. Our scoring is currently very positive (3 ) for the month-on-month change and 3 for price indexation. It means that we are in the early positive phase of the cycle. Both scorings range from -3 up to 3 . The development of the estimated cycles based on our analytical system 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. According to all MAs, XAG/USD is in bearish sentiment because it is below them. In the event of a rebound, the monthly MA may be a resistance to the market price.
Since our last analysis , there have been more declining trends, with a maximum of 4 consecutive days. The total maximum for the downtrend for the last 3 years is 8 days. Upward trends have not exceeded more than 2 consecutive days in recent months. The total maximum for the last 3 years is 5 days. We could use the average long-term ATR (Average True Range) obtained from daily data (2.71% ) to estimate Stop Loss orders for our positions. The current value is 2.18% , which is below average. Approximately 90% confidence interval (return between -3.00% and 3.00% ) 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.
The basic technical analysis points to the short-term bearish development in recent weeks. Recently, however, there has been a rebound in the lower part of the demand zone (green rectangle), where is also the Fibonacci retracement level of 38.20% and the short-term moving average. In addition, the divergence between price development and the RSI could motivate bulls to take power. In the case of a further decline, additional support for the bulls could be the psychological level of 21.00 or the Fibonacci retracement level of 50.00% .