May Silver is trading firmer overnight following Monday’s strong surge to the upside. The rally in silver was fueled by dovish comments from U.S. Federal Reserve Chairman Ben Bernanke.
The overnight move in silver does not change the trend to up, but it did help to form a new main bottom at $31.09. Currently, the market is walking up a very steep Gann angle at $33.01. Additional support comes in at $32.05 and $31.57.
Based on the main range of $37.58 to $31.09, expectations are for this market to eventually complete a 50 to 61.8 percent retracement of this range to $34.34 – $35.10 respectively over the near-term.
Downtrending Gann angle resistance comes in at $34.54 on Tuesday. It is currently splitting the retracement zone, but drops in at $34.38 on March 28 to form a resistance cluster with the 50 percent level at $34.34 (See Arrow). This is the expected upside target.
Counter-trend traders may want to hold on for a retracement into this price area, but have to remember that in order to reach this resistance cluster on time, the market must maintain a 64 cents per day upside move. Otherwise the May Silver will revert to a slower moving Gann angle and change the timing of the trade.
Trend traders may want to wait for a move into the resistance zone before considering re-entering on the short side of the market. While the target prices are good, there has to be a shift in momentum to the downside when they are being tested.
If a stopper doesn’t start offering or if buying pressure doesn’t subside, then prices may continue to rise. This will be especially true if the rally is event driven like Monday’s rally. Despite having solid upside targets, this is only analysis. As a trader, you have to be aware of the order flow at the time the area is being tested. In addition, you have to know your exit before you determine your entry.
