It's time again to update my
technical perspective on silver.
Last week the strong rally in
Silver ended exactly at the 61.8% retracement from the bear market since the
summer 2008 from the $21.44 low to the November low $8.40. I still find id
amazing how precise markets can be at times.
Weekly Silver Trading Chart
Since hitting this important Fibonacci level
last week silver is down more than 8% already. Silver was quite overbought and a
correction was expected. Normally corrections in gold and silver last 2-6 weeks.
Daily Silver Trading Chart
On the daily chart you can see that the RSI
has already turned down and as well MACD is creating a sell signal right now. On
top the 50 and 200 Moving averages (as possible support) are still quite far
away. Therefore Silver should at least retreat to the 50-61.8% retracement
levels within the next couple of days and weeks.
If $13.50 does not hold on a daily basis we
will know that this is not just a correction within an uptrend. In this case I
expect silver to test the strong support around $11.80-$12.80.
Besides the technical picture as well
seasonality definitely does not favor any long positions at the moment. “Sell in
May“ seems to be the right decision again this year in spite the ongoing
long-term bull market in precious metals.
Daily Silver Trading Chart
As well the chart of my favourite silver
mining stock SILVER WHEATON clearly shows the potential for an ongoing
correction.
Between $10.80 and $12.00 there is massive
resistance and prices broke down with increasing volume after running on top of
the Bollinger band.
The 50 and 200 Day Moving Averages are far
away which is plenty of room for prices to drop further !
Therefore I think the chances are pretty high
to see the share price for Silver Wheaton falling down into the $8.50 to $9.00
levels. Here we could find a very good setup for a reentry later this summer
once the commodity market takes a breather.
You can recieve my trading analysis free each
week if you like my view on the markets.
Florian Grummes
www.TheSilverGoldSpot.com