Silver Modest Correction From Strong Resistance

By: Clive_Maund

Although gold and silver dropped quite sharply last week, longer-term charts reveal that nothing broke technically and the reactions were in fact within normal parameters, and the reaction in silver was actually quite modest, given what could have happened in the circumstances.

Silver’s 2-year chart puts its reaction last week into perspective. On this chart it doesn’t look like a big deal as it didn’t take it down to the bottom of the uptrend and didn’t even take it below its 200-day moving average.

For reasons discussed in the Gold Market update, the broad market and PM sector are expected to stage a recovery rally shortly, and on the silver chart here we can see that it is certainly well placed to turn up again soon, for there is plenty of underlying support at and not far below the current price, arising principally from the lower channel support line and proximity of bullishly aligned moving averages, and depending on how strongly the sector recovers, silver may have a crack at taking out the big resistance in the $19 - $21 range, after absorbing overhanging supply from this zone for many months.

Note that failure of the channel, while obviously not a positive development, won’t necessarily result in a bear market developing in silver. Instead a trading range may develop for a while bounded by the support in the $15 area and the resistance in the $19 - $21 zone, although at this stage there is no indication that the channel is going to fail.

By Clive Maund
CliveMaund.com

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© 2010 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.

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