Back to Blog

Silver and gold bounce off important support levels to resume this year's bull trend

Jason Sen

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.

Click to expand image

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.

Click to expand image

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.

Click to expand image

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.

Click to expand image

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.

Click to expand image

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.

Click to expand image

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.

Jason Sen
Technical Analyst & Trader

For more information, trading education and offers visit Intertrader

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.

Share this post

Back to Blog

Spread betting and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading these products with this provider.
You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money.