Thursday, December 29, 2011

Silver, a (short-term) bottom?

I would like to take a closer look at today's silver action.

On the daily chart, we see that silver is extended from it's 20-day moving average. As they say, the rubberband is stretched. So a move back up could happen any moment now.

Yesterday we saw a big down-move on higher than average volume. Today we had a gap down, an equal amount of volume (or almost) and a big candle, closing strong near the high of the day. This candlestick pattern is called a piercing line and is a bullish reversal pattern.

Together with the strong volume (remember, this is 'holiday trading'), this candlestick-pattern might indicate a bottom here. I'm not saying THE bottom, but at least a short-term bottom. I would like to see a move towards the gap fill of 12/13, with a target of 29.50-30 (without ignoring the 20MA, because this will probably be the first resistance to overcome). Let's watch volume and price action closely in the coming days!

A quick view on the weekly chart below. Tomorrow, silver needs to close higher or near today's close, so that a hammer would be formed on the weekly chart. We bounced just above the 25-level, also near the January '11 lows.

Disclosure: no position in SLV

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