Silver: Searching for support.

Silver formed a white hammer in the last session, closing at US$27.70. This is a single candle reversal signal which has to be confirmed. If valid, we could see price heading higher and testing resistance provided by the declining 50dMA once more. The 50dMA is currently at US$32.05.

The 50dMA has proven itself to be a strong resistance, pushing prices lower in November and early December when it was tested. It would take some extraordinary buying pressure to break through this wall to go higher. I expect traders to recognise this as well and many sellers would be waiting to sell if the 50dMA should be tested.

Looking at the MACD, it is in steady decline in negative territory. However, not reaching the depths it did in October is promising. We could see the formation of a positive divergence. A lower low in silver's price with higher low in the MACD would be a buy signal for me.

If I do buy some silver upon sighting a positive divergence, would I hold forever? Probably not. It would probably be for a trade and I would probably sell at resistance. Why?

Looking at the weekly chart, the MACD is still plunging. Momentum over the longer term is clearly negative with no reversal in sight. Although decreasing volume with continuing price weakness is encouraging for long holders, price could drift lower. I would like to see major support provided by the 200wMA tested before making my next move.