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Technical Analysis of Silver

In the bigger picture, silver has been trading in a downtrend channel since March 2011 when it reached the dizzy heights of 49.66, finishing the year back at January 2011 levels around 27.38. Bullish sentiment towards silver has really built up in 2012 with investors remaining heavily long, hoping that this grind higher could continue to test old highs.

On the daily chart silver has been trading firmly above the 89 SMA since the beginning of the year with the bullish bias further confirmed by the cross of the 20EMA above the 50EMA on January 27th. It should be noted that silver is currently working its way up above the 38.2% Fibonacci level from March 2011 highs to December 2011 lows on the weekly chart opening the door for further upside movement. The bullish RSI and the recent drop in the US Dollar index both favour long positions on silver with target at 37.59, the 50% Fibonacci level. In the alternative scenario, failure at current level, followed by break of 32.64 (23.6% Fibonacci level), could turn outlook bearish for a test on 27.14.

Dafni Serdari
Market Analyst
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