In this article, we will have a look at different time frames for Silver.
Long term charts (which are important for investors) may reveal a completely different story than short term charts (which are important for traders and speculators). However, I think it’s smart to have a look at both pictures from time to time…
Now that 2011 is behind us, we can start with the Yearly chart.
This doesn’t look too good, as we now have a bearish inverted hammer candle, which was also trading COMPLETELY outside the Bollinger Bands, which is often a sign that a change in trend is near.
When we look at the Quarterly chart, we can see 3 exhaustion candles in a row, which is not a good sign either.
If this bull market is to be continued, I would like to see a bullish hammer like the one I have drawn in the chart below.
Silver closed below the middle Bollinger Band in December (on a monthly basis), which is not a good sign either. It needs to recapture this level for me to become more bullish about Silver.
A faillure to do so, would probably lead to a further drop in price towards $19-$20.
When I laid out possible scenarios for silver back in april 2011 (when silver was trading near $50), I got many emails from readers who said I was a fool when I said silver could be headed towards $22 and lower. Now that silver is trading around $26-$27, it doesn’t look all that crazy anymore, does it?
On a weekly basis, the RSI has set a lower low last week, which is bearish. However, silver MIGHT set a double bottom at those levels. If it doesn’t drop below the recent low, we might get a very nice rally from current levels.
The MACD is oversold, but can stay that way for quite some time…
This is an updated chart which I posted back in March and April 2011. I took the low of 1993 ($3.50) as the bottom of this Bull market (instead of the lows of 2001-2002 like most people do), as this is the “real” bottom after the 1980 Bull Market.
When we draw the Fibonacci Levels on each parabolic rise, we can see that silver ALWAYS retraced at least 50% of its parabolic rise, and in 2 out of 3 previous cases, it dropped as much as 61.80% (towards the 38.20% Level).
This could mean that silver has either bottomed recently (as it reached the 50% level), or that silver will drop towards the low $20, which would be the 38.20% level.
I expect that we would see very strong support at those levels (around $19-20), as that was the breakout level of last year, but also the last uptrend support line of this entire bull market. I think we should buy with both hands IF price gets to those levels. (Remember that IF it does get that far, silver would have dropped more than 60% since its peak in April 2011!)
Charts above courtesy Prorealtime.com
Sentiment for Silver is UBER bearish right now (which is Bullish for those who believe in prices going higher), which doesn’t “justify” silver to drop towards $20 immediately, but think about this:
Why wouldn’t it be possible for sentiment to remain depressed for quite some time (while price continues to drop), just like sentiment stayed Bullish (while price continued to rise)?
Chart courtesy Sentimentrader.com
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