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Technical Analysis of the Silver Market

EconMatters's picture




 

By EconMatters

 

 

Portfolio Rebalancing for start of 2013

 

Silver closed Friday`s trading session at $28.46 an ounce, capping off what has been an auspicious start to 2013. On January 23rd Silver was trading at $32 and has been in a downtrend ever since trying to find a support level that will hold. 

 

There is some real minor support at the $28 level, but nothing to hang your hat upon. The real 2-year support is the $26 level, where it has bounced four times from the level in the last three years.

 

If it breaks the $26 level, then there is pure air all the way down to $20 an ounce, which we last saw in August of 2010. The next level of support would be the $17.50 - $15.00 area which used to be upward resistance prior to 2008. 

 

Technical Uptrend Levels

 

If $28 or $26 holds and silver bounces off these levels a break above $30 would be a start, but an uptrend to be confirmed needs to close above the downtrend upper channel line around $32 with conviction, which will attract new buyers in the metal. 

 

If Silver can close above $32, then $34-$35 is in the cards. The $35 level of resistance has been tested four times during the last two years, and silver has been unable to break out above this area. 

 

$35 Resistance Level

 

However, a close above the $35 level brings the $40 resistance level into play. The next upward resistance level is around the $45 an ounce area, and expect a downward rejection of this level for the first test - if historic patterns are our guide. 

 

The final level of resistance is the $50 an ounce level which has never really been tested since the April 2011 period, needless to say, this level should also provide substantial selling pressure the first attempt at breaking through the barrier, depending upon the reasons silver is up there in the first place.

 

Unchartered Territory

 

If Silver breaks out above the $50 an ounce level, then the market is in new territory, and you want to be long until some resistance level is rejected. Whenever a market gets into unchartered territory, the rules are being made up on the fly so to speak from a technical standpoint. This is an area that shorts can really get hurt because moves can explode around these types of historical technical breakouts. 

 

Value Trading vs. Major Trending Market

 

I anticipate the Silver market being used more as a value trading market like it has been basically for the last two years with buyers coming in looking to buy low and sell for a trade, and at the high end of the range, sellers coming in for a range trade, anticipating selling at the high end of the two year range, and closing out their positions at the bottom end of the trading range. 

 

The Silver market has been unable to go on a sustained trend in either direction during the better part of two years after what I refer to as the liquidation drop in September of 2011.  Ergo, it will be interesting to watch when the next definable trend will take hold in the Silver market, and the related market events that play out as the catalysts for such a move. 

 

 

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Sun, 02/24/2013 - 13:26 | 3271688 WTF2
WTF2's picture

This was posted a few weeks ago.  ZH posters are not open minded on the subject of PM going down.  Not remotely possible and unless you what feces thrown at you keep it to yourself.



Vote up!

1
Vote down!

-30 12 year bull market in gold is ending.  Ironic but true.

Sun, 02/24/2013 - 13:23 | 3271667 Dr Paul Krugman
Dr Paul Krugman's picture

Why would anyone own silver coins/bars as an investment anyway?  It just sits there; it does nothing but sit there.

It would be better if everyone gave up their silver hordes to science so we can continue to use it as a super conductor, which is it's most important - and really only - use.

Firms should be the only investors in silver.  Solar companies and technology companies; they are the ones who need it so they can make their machines and technology.

As far as doomers go, well, it looks like they are going to lose all their money clutching the bullion, unless they realize that owning something that sits there like a rock is the least productive investment one can make with one's hard earned money.

Sun, 02/24/2013 - 14:50 | 3271783 Lordflin
Lordflin's picture

I suppose one could employ sarcasm and suggest that the thing you're sitting on is your brain.... That aside...in a period of extreme uncertainty and capricious manipulation the logical response is to move to the sidelines and hold cash. As the currency is being rapidly depreciated one seeks an alternative money that has no counter party risk.

Hope this has helped... And damn I am tired of the 'just sits there' argument... You forgot to mention the shiny part... Sorry... More sarcasm...

Sun, 02/24/2013 - 13:34 | 3271719 WTF2
WTF2's picture

Yes the doomers will be clutching their gold, while making ammo for their arsenal the whole time screaming that "all that money out there is phony anyway".

Sun, 02/24/2013 - 13:30 | 3271706 akak
akak's picture

Why would anyone own life vests?  They just sit there; they do nothing but sit there.

It would be better if everyone gave up their life vests while boating in stormy weather so we can continue to use them as pulp for paper currency, which is their most important - and really only - use.

As far as doomers go, well, it looks like they are going to waste their time clutching their lifevests (even as their boat is taking on water), unless they realize that owning something that sits there like a rock is the least productive investment one can make with one's hard earned money.

Sun, 02/24/2013 - 13:41 | 3271738 akak
akak's picture

Oops, looks like I ran afoul of the literally-minded, blind-to-sarcasm crowd again.

Damn you all!

Sun, 02/24/2013 - 13:39 | 3271729 Dr Paul Krugman
Dr Paul Krugman's picture

If it is a lifevest that you want, then buy an annuity.

I'm not sure if you have ever gone swimming with rocks in your pockets, but if you haven't, good luck, because if you do, you may wish you were wearing two lifevests.

Sun, 02/24/2013 - 13:20 | 3271661 lieto
lieto's picture

 

Nice period cherry pick.

How about the longer term picture and how these charts look in context?

It does appear that there will be a resolution of some of these longer term chart patterns soon.

March OI is through the roof, a serious wedge on the charts, with longer term support just below where we sit.

That's not even mentioning how oversold these markets are in the near term.

Physical PM's are being accumulated around the globe not to see daylight any time soon or at any price we have seen in your time frame.

There is a lot of metal  in strong resolute hands that don't care about near term pain but rather look at these prices as an opportunity to buy.

 

 

Sun, 02/24/2013 - 13:16 | 3271651 A82EBA
A82EBA's picture

Fibonacci 2aug2012 to 13feb2013 : triple mark at 61.8%

Sun, 02/24/2013 - 13:11 | 3271630 tomche
tomche's picture

I fail to see how technical "analysis" has any bearing whatsoever in manipulated markets. Anyone?

Sun, 02/24/2013 - 13:11 | 3271629 tomche
tomche's picture

I fail to see how technical "analysis" has any bearing whatsoever in manipulated markets. Anyone?

Sun, 02/24/2013 - 12:44 | 3271575 Lordflin
Lordflin's picture

Where did you pull these numbers... The bathroom wall of your corner gas station?

There is not enough paper on the planet to support a 20 dollar silver price... And so far as your up trends... The relevant numbers are 30, 32.50, 35, and 37.50... Doubt there is a ZH reader without these numbers emblazoned on his brain... They are the same numbers we have lived with for the past two years of manipulation... Not that the manipulation is only two years old, but the numbers were different back then...

Anyway... Thanks for the update.

Sun, 02/24/2013 - 12:09 | 3271486 Clint Liquor
Clint Liquor's picture

Technical analysis with no mention of the falling wedge shown in the last two charts? The wedge is massive and heading for an apex in the near term and it is ignored? I smell an agenda.

Sun, 02/24/2013 - 11:17 | 3271379 thewayitis
thewayitis's picture

Technical analysis is out the window for now. We need to just wait and see in this busy week coming up. Fed speaks Tues/Wed. Majority opinion is More QE.....

Sun, 02/24/2013 - 12:02 | 3271469 kliguy38
kliguy38's picture

You have to know the game and price suppression comes with a price for the true power. To replace the bullion lost there will be a required parabolic move soon that brings back the momo buyers and paper bullion purchasing. They will experience some very painful stop runs which will allow bullion accumulation by the Banks....and a replentishment of the JPM/HSBC short position. Don't be surprised to see 70$ within 6 months.

Sun, 02/24/2013 - 06:45 | 3271192 doggings
doggings's picture

"Market Analyst" is so clearly EconMatters second account / mate / sockpuppet

youre not fooling anyone you know

Sun, 02/24/2013 - 13:11 | 3271632 Market Analyst
Market Analyst's picture

doggings,

you are so right about that, an absolute you got me!

 

Now maybe you can get on with your pathetic life, and find another purpose to fill your crowded schedule.

You might want to start by getting out of your mom`s basement, and getting a job:)

Mon, 02/25/2013 - 03:18 | 3273344 doggings
doggings's picture

and you might want to get yourself a new cliche book and some new account names, yours are all a bit tired now

 

Sun, 02/24/2013 - 13:14 | 3271648 Jack Sheet
Jack Sheet's picture

even better, consult tfmetalsreport or dan norcini rather than this garbage.

Sun, 02/24/2013 - 02:09 | 3271077 Market Analyst
Market Analyst's picture

Great article EconMatters, thanks for the free technical analysis. We really appreciate all your hard work on the markets, thanks again.

MA

Sun, 02/24/2013 - 11:47 | 3271429 I need more cowbell
I need more cowbell's picture

Hey, MA, do you spit ot swallow?

Do NOT follow this link or you will be banned from the site!