Technical Analysis of Silver
Traditionally, metals such as gold and silver have been regarded as safe havens at times of financial turmoil. In the current unstable economic climate, where even the prices of these two metals sometimes fluctuate wildly, some investors might ask the question whether this is still the case.
To give a sensible answer we have to take a longer-term view. Fig 11.30(a) is weekly a chart depicting the price of silver since March 2007. Here we see that on 19th October 2008 the price reached a low of just above 8,600. The current price of just below 32,000 therefore represents a growth rate of nearly 400% in three years, way above that achieved by any share index and a clear indication that silver is still an excellent store of value, despite the fact that it is currently trading well below its recent maximum price.
Fig. 11.30(b) shows us that, after the disastrous drop on 22nd and 23rd September, when the price went from 39,800 to 30,800 in two days, silver has been moving mainly sideways.
The current price of 31,925 is slightly above the recent minimum. It seems to be emerging from the cloud in a downward direction right now, but given the recent price behaviour this is not enough to warrant a short trade. The blue Kijun Sen line is still in the cloud and a cautious trader would wait for a close below 29,925, which we briefly saw on 20th October 2011, before risking a short trade.
Any close above the Ichimoku cloud might be an indication that the long-term bull trend is resuming.