METAL HEADS-WHATS UP WITH SILVER

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I was asked to give my opinion on what Silver may be doing in the near and long term future.
Well, Let me get out the magic 8 ball and tell you if it is going up or down. Ugh! the dam thing keeps giving me a "Cannot Predict now" Serious try it yourself. Magic 8 Ball.

OK, All joking aside, Our Countries leaders never used this method to make important decisions right?? Right. So we can not either with our investments. I am a Technical traders so my decisions to buy or sell an instrument is based 99% Technical and 1% Fundamental(news).

Trading forex is not easy and you need an edge to beat the market learn to trade like the pros with the pros for $1 DOLLAR

The first most important thing you can do before deciding on any investment is to set aside the biggest killer of individual investors. EMOTIONS. It has to be all business. There can be no Panic and you must posses extreme patience and discipline. Ok lets get into Silver. I am not going to get into why or where or the history of silver etc.. We are just going to look at the charts and where the price of silver has been and where it may be headed based on primarily Support and Resistance(S/R) And what fundamentals can drive this commodity up or down. I am going to assume that this is a long term investment(1035 transfer) so we will not go any lower then the Daily charts for our analysis.
(Note: You may want to open this page twice. One screen to see the chart and one to read the analysis)
XAGUSD-Silver Monthly chart

I always look at the monthly first. It gives a very clear picture on the overall bias(direction) of the market. Then I will work my way down in time to decide if I want to trade the instrument on my preferred time frame. Since we are looking for long term here the daily will be the lowest.

What do we see. A beautiful chart- Very clear on where it has been and where it may go.

1. Very clear support and resistance areas at six price levels- 8.61, 19.87, 26.02, 35.46, 43.68. and 47.91 respectively.
2. So by looking at these levels we see two possible things will (have) happen. A bounce or a Breakout.
3. Currently price is moving side ways between 26.02 and 35.46.
4. Price is getting ready to retest the resistance level at 35.46.
5. 35.46 has held as resistance for 4 attempts. each time resistance has driven price back down to 26.02.
6. If I were to trade just off this time frame-the signal here is to Wait till price tests 35.46 for a bounce(sell) or a breakout(possible buy). The key here is Wait. Unfortunately price is in the middle of nowhere. If I were to buy now I run the RISK of price only going up to 35.46 and bouncing all the way back to 26.00 exposing about a 10.00 per ounce risk.



XAGUSD-Silver Weekly chart

On this time frame we get an even clearer picture of how price has behaved around the 5 key S/R levels we saw on the monthly chart. If we look at the first yellow highlighted area of this chart we see a very well defined pattern called a Breakout Pullback Continuation- What happened is a universal S/R trading principle where, what was once resistance may now work as support. The 26.02 level was resistance and now is a very heavy (strong)Support level. We also see a very reliable candlestick pattern at the buy signal (a pin bar-Hammer formation) Price rocketed all the way to 50.00. But then the bottom fell out. So Buy Hold and pray would have taken you back to where you first bought the instrument. And.. if you had held it you would have been experiencing the roller coaster from hell for the last year. Price has just been bouncing sideways.(range bound) So What needs to happen. As a long term investment we definitely need price to do one of two things.

1. Retrace back to the 26.00 area for a buy entry and then hope we do not see too much longer in the roller coaster. But, If I am long term I can wait for it to reach the upper band of the range at the 35.50 area to sell it. (You will need to have a strong stomach to handle the volatility)
2. Wait for price to repeat the move it did when it broke 26.00 level back in January 2011. If price does break and holds above the 35.50 area we may see a repeat of the range move for the last year. between 35.50 and the 50.00 dollar range.

I believe that due to the information we were able to gather from the Monthly and Weekly charts that looking at the Daily right now is not needed. We will monitor this closely to see what opportunities present themselves over the next trading sessions with Silver. I will leave you with a very good video. Oh the fundamentals. I need to do some more info collecting before I can give you the market bias based on the sentiment. Emotions of the market. Lets roll with the Technicals for now

Trading forex is not easy and you need an edge to beat the market learn to trade like the pros with the pros for $1 DOLLAR

Be careful and enjoy the ride