Sunday 6 March 2011

Silver: Technical Analysis.

Silver's price has exploded upwards and James Turk is probably right in saying that "the silver shorts are losing control". With more believing in the long term uptrend of silver and shortists forced to cover their positions, silver could go much higher. Silver at US$50 an ounce in 2011 is the stuff of idle chatter now.


Looking at the chart above, it is easy to see lower highs on the MACD as silver broke US$30.00 an ounce towards the end of 2010. The negative divergence suggested that a correction was coming and it did happen. So, it was fortunate that I sold some silver when I did in December 2010.  See: How is my investment in silver doing?


Silver then went into a downtrend that did not last very long. It was in the region of about US$27.00 an ounce, approximating the 100dMA, that it bottomed in late January. I was waiting for it to go lower towards the 200dMA before accumulating but it never did happen. This was unfortunate for me. See: Silver broke short term resistance.

What this means is that many who were waiting for the same correction towards the 200dMA would not wait during the next correction. The 100dMA is now psychologically a strong support. Buy on every pullback is the mantra for silver investors now and chances of the 100dMA support holding up are higher now.

For anyone thinking of getting some exposure to silver now, buying on any pullback remains the prudent thing to do but waiting for a deep correction before buying in could be a mistake if my recent experience was anything to go by. The current supports for silver are at US$32.00 (20dMA), US$30.10 (50dMA) and US$28.33 (100dMA). Good luck!

6 comments:

Manish Gupta said...

now at almost 40 US$ an ounce should i wait for 50 dma to buy more of silver ??

AK71 said...

Hi Manish,

I cannot tell you if you should wait for the 50dMA to buy more silver. I can tell you that I am not buying more at the moment. ;)

I am wary of the negative divergence formed in the price and the momentum oscillator, MACD.

There could be a pull back but when would it happen? I do not know but I would feel safer buying on weakness.

Unknown said...

I am a follower of your blog and I find it very useful.

Pls inform us when there is an opportunity to buy.

Thanks.

AK71 said...

Hi Ng,

I am glad you like my blogs. :)

I have indicated where the current supports are and those are the levels where I could add to my long position. ;)

Anonymous said...

Hi ,

just been reading a lot of articles and it seems that silver rally is nearing the fizzle out state most likely when the $ starts pull back.

thanks for the key levels to buy at.

AK71 said...

Hi Anonymous,

No matter how bullish something is, prices do not go up in a straight line. Also, the price of silver has gone almost parabolic. It could go up higher but the risk of a pull back is getting greater.

Could you include your name or initials in future comments? Thanks.