Sunday, December 19, 2010
Silver closed the week above well above $28.00 in the area of a nice move above $29.00. $28.00 is very important level to hold as this is the main support for this time consolidation that the market is in. These prices can either correct through time (sideways action) or through price (movements in the opposite direction of trend).
The market is holding up very well and is still well above the fifty day average. Gold is testing the fifty day average now where the Silver market did not even touch the fifty day average during the entire fall season .(pending it does not lose 10% in the next two days) This shows us that silver is outperforming gold as the gold December high is only a shade above their November high as Silver gained five percent more from the two highs (Nov 29.33 and Dec 30.75).
On this chart of Silver we can see the price action is moved up to the five and ten day moving averages. It is fine if there is resistance at this level, but if this is the case and it falls lower it will be important to establish a higher low to keep this uptrend active. Therefore if it falls back to $28.60 or in that area then it would be another higher low and thus make the odds of a break above the five and ten be very favorable. What would play out perfect is a move down to the twenty day moving average where it can find support and then battle the five and ten and break above it.
If it gets above these averages what I would be looking for is a move up to the $30.00 area that would come back and find support at the rising five day average and then pick up a long position for silver as its breaking above this level with a stop below whichever support level is tested. For example, if it goes up to $30.22 and then comes back to $29.50 to test the five and then starts rising then a buy order after you can establish one higher low and momentum to make a higher high. Place a stop in the most appropriate place (usually below the key support level from before from either price action of fibonacci)
If you are buying physical silver and want to play the charts the concern area is that we are near the $31.40 which is supposed to be resistance. I feel that if this area is that and it pulls back or corrects through time that it will only be short lived. This is where we can mix fundamentals with technicals and then state that all pull backs are counter trend rallies that generally fail. When a level of resistance is not met with anything to stop the uptrend, then that usually means a major burst to the next fibonacci level. In this case it is $48.00/oz which we will call $50 because that is the level of the 1980 highs. Therefore if you want to play this resistance game then the way I am approaching it is waiting for a pullback to the $25.00 handle or see how this $31.40 mark holds and check to see for confirmation that the next move to $48 is coming. To see confirmation we need to see it burst through this level (and then you wait for the market to consolidate before buying) as well as any price action that shows that $31.40 is support and its ready to burst higher from this point. Therefore that means the next purchase is either a)$25 if it retraces lower, b) $32-$33 if you buy on a breakout or c) much higher if it bursts through $31.40 without any consolidation as you then wait for this to happen. An example of this would be a big move over a week or two that goes from $31 to $50 and then you use fibonacci or some other indicator to wait for the next pullback to buy. this level could be $40. Who knows as successful traders always adjust to what the message of the market has in store for us. If you stay tuned to this channel then I will inform you on when its time to buy again.