Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
What to Expect at a Critical Stock Market Point: End of a Wave 2 Rally - 25th May 18
Merlin Passes Top Tips for Buying and Using Premium vs Standard, Theme Parks UK - 25th May 18
Trump “Victories” on Trade are Anything But - 25th May 18
Crude Oil: It’s Here! - 25th May 18
Stock Market Distribution Pattern Revealed - 25th May 18
Stock Market Topping - Everything Looks Rosy at the End of a Trend! - 25th May 18
Trump Puts North Korea Nuclear WAR Back on Track as Plans for Nobel Peace Prize Evaporate - 25th May 18
Insane EU GDPR SCAM Triggers Mass Email Spam Attacks! - 24th May 18
Stock Market Higher Again, but Still No Breakout - 24th May 18
Study: Slowing Global Economic Growth IS NOT Bearish for U.S. Stocks - 24th May 18
What if This Week’s Rally in Gold is Already Over? - 24th May 18
EUR/USD – Reward for Bears - 24th May 18
5 Terrible Trading Mistakes That Rookie Investors Keep Making - 24th May 18
More Clarity for the Short Term for Bitcoin Price - 22nd May 18
Study: A Rising and Strong U.S. Dollar Isn’t Consistently Bearish for the Stock Market - 22nd May 18
Gold, Silver & US Dollar Updates with Review of Latest COTS - 22nd May 18
Upside DOW Stock Market Breakout May Be Just the Beginning - 22nd May 18
5 Reasons Why Forex Trading Is Becoming Such A Big Deal In SA - 22nd May 18
Fibonacci And Elliot Wave Predict Stock Market Breakout Highs - 21st May 18
Stock Market Ideal Cycle Low Near - 21st May 18
5 Effects Of Currency Fluctuations On The Economy - 21st May 18
Financial Conditions are Still too Easy for the Stocks Bull Market to End - 21st May 18
US Stock Market Elliott Wave Predictions for 2018 and Beyond - 20th May 18
Are You Still Fearful of Cryptos? - 20th May 18
US Stocks - Why I am Short-term Bearish, Medium-term Bullish - 20th May 18
Looking for a Turn in Gold Price - 20th May 18
GDX Gold Mining Stock Fundamentals 2018 - 19th May 18
Semiconductor Stock Market Canaries: Chirp, Warble… Soon a Croak and Silence? - 19th May 18
Three Drivers of Gold Price - 18th May 18
Gold Market in First Tertile of 2018 - 18th May 18

Market Oracle FREE Newsletter

Trading Lessons

Silver Recent Price Drop is Just a Storm in a Teacup

Commodities / Gold and Silver 2012 Dec 24, 2012 - 06:23 AM GMT

By: Clive_Maund

Commodities

Many silver longs were upset by the rather sharp drop over the past week or so, but as we will now see, this drop looks like a 'storm in a teacup' on longer-term charts.

On its 12-year chart, which goes back to the start of the bullmarket, we can see that the top boundary of the uptrend from 2004 is defined by the line drawn across 4 important peaks, and it is from this line that the parallel supporting trendline beneath is derived.


While there is no law stating that the lower trendline has to be parallel, it is nevertheless likely, and it is regarded as no coincidence that the strong support at recent lows, which needs to hold, and this lower trendline are close together at this time - if the current reaction continues this is the area where it should stop and reverse, although as we will see later on the 6-month chart it may not drop back any further than where it is now.

Silver 12-Year Chart

Having gotten a perspective on the entire bullmarket, we will now look at the action from the 2006 peak in more detail on a 7-year chart. On this chart we can see more clearly where silver will arrive at a 'buy spot' if the current reaction continues, in the green oval. Since the August 2011 peak silver has been trading in a bearish Descending Triangle, with a very clearly defined line of support at its lower boundary, which it broke out from to the upside in August, a bullish development. Even after last week's decline the recent reaction back looks like a correction to the 1st impulse wave out of the Triangle, which has brought the price back towards support at the top boundary of the Triangle. For the bullish case to remain intact the price should go no lower than the green oval shown, where silver will be a buy, with stops below the support or the lower trendline. Here we should note that the setting of stops with silver is not as 'cut and dried' as it is with gold, as by the time you are stopped out of it, if your stop is below the trendline, it will be at about $24, and the next serious support starts to come into play not so far beneath in the $20 area.

Silver 7-Year Chart

Although the 6-month chart for silver looks pretty grim at first sight, with it falling relentlessly for 7 trading days in a row and breaking below its early November lows, on closer inspection we can see that it has arrived at the bottom of a tentative channel and is now quite deeply oversold. So it could be right at the bottom of a 3-wave A-B-C zigzag that has served to correct the first impulse wave out of the Descending Triangle that occurred during August and September, which is labeled on the chart. It's too early to say regarding this and it could continue lower to the support shown, although the appearance of the doji on Friday, indicating a state of indecision, could mark the low point.

Silver 6-Month Chart

Silver's retreat of the past several weeks was presaged by a strongly bearish COT structure, and while the readings on the chart shown below, which is only up to date as of last Tuesday night's close, can be expected to have moderated further as the week went on, in response to the lower silver prices that ensued, Commercial short and Large Spec long positions can be reasonably presumed to be still at high levels which urge a measure of caution short-term.

Silver COT

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2012 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules