Silver and gold bounce off important support levels to resume this year's bull trend
Silver bottomed out in December 2015 and started a good recovery in January this year. As you no doubt know, I have been a gold and silver bull for a while and I remain so. However, we experienced an unexpected correction at the start of this month when silver collapsed from the mid-$19 area. Hence we hit the 50% Fibonacci as you can see in the weekly chart below.
This is a fairly insignificant support level and so not a reason to be looking for a resumption of the bull trend. When you add in the bull trendline support for this year, however, the weekly chart becomes far more interesting.
I have zoomed into the weekly chart to show how the price has neatly closed above the 10-month trendline in this bull correction phase. I like to look for three reasons to support a trade and in this case it was easy to find confirmation for the buying opportunity from the 200-day moving average support (the red line in the daily chart below). As you can see, the price has danced delicately above this support for the past two weeks. Finally it is beginning the recovery.
Add to this the oversold stochastic at the bottom of the daily chart and you can see why we had our clients buying into silver over the past week ready for this move.
The same picture for gold?
If you are looking at silver it’s always worth having a peek at the gold chart to see if it lends support. The weekly chart is rather less compelling but we did test and hold the 38.2% Fibonacci at 1249, on a closing basis, after dipping as far as 1241.
Now on the daily chart we have also managed to climb back above the 200-day moving average. You can see this in the chart below. If we can beat the first 23.6% Fibonacci resistance at 1272 the outlook consequently becomes more positive.
Lastly we are getting some short-term confirmation on the one-hour chart. This comes in the form of a bullish crossover of the 100 and 200-hour moving averages.
I have to admit I did not manage to buy gold in the mid-1250s this week. I was too slow off the mark but I will remain a buyer on any weakness and intend to hold on to my silver longs.
Technical Analyst & Trader
The content of this article is the personal opinion of the author and not Intertrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.