Silver bounces off important support levels
I have been following gold and silver very closely this year as well you know. The silver break below Fibonacci support at $19.14/$19.30 in the middle of August triggered a move towards important support at $18.30/18.20. The spot price managed to bounce just six cents above this important support level and we have seen a strong recovery in the beginning of September.
You can see this clearly in the daily chart above. Important support at $18.30/18.20 included the 100-day moving average, the purple trendline and the Fibonacci support at $18.28. You can also see how we have been in a nice steady bull trend since the beginning of the year and I believe this is likely to continue.
However, the recovery is just hitting a small bump in the road in the form of the upper trendline of a descending channel. In the daily chart above, the descending channel is marked by the red trendlines, which start at the end of July and beginning of August. The price is just kissing that upper trendline now at around $19.60. We are very overbought in the short term and there is a big risk of the price turning around here. In fact, I hope it does because I did not manage to buy into silver in the low $18 area. I was holding out for something sub-$18.30, but I think I am going to get a second chance at this.
If short-term overbought conditions at trendline resistance hold the price, we could head back to important support in the $18.40/$18.20 area. This could be an area worth jumping into a long position in silver in the hope that the bull market continues. Further support comes from the May peak at $18, so I would only consider myself in the wrong position if we were to see a couple of days’ closes below this point.
The other problem for bulls comes in the form of the 200-week moving average, also around the $19.50/$19.60 area, marked by the red line in the weekly chart below. This reinforces the trendline resistance we see on the daily chart and is another reason why we could see the price turn around to re-test the important support level for a buying opportunity.
We certainly can’t rule out a break above $19.60, which would be a further positive signal for silver, confirming a low in place in the mid-to-low-$18 area and a continuation of the bull trend. We would then be looking for $20.10, $20.50, the August high at $20.78 and eventually a re-test of the July high at $21.10.
Technical Analyst & Trader
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