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« The USD Bounces As Gold and Silver Tumble: That’s what we want! | Main | Silver Wheaton: Beginning to Correct »
Monday
Jul302007

Technical Analysis of The Summer Silver Market

Our technical analysis of silver served us, and hopefully many of our readers, very well recently when we called for a $0.50+ rise in silver prices in the first few days of July. This prediction came good and so we now take a look at the situation around silver prices at the moment.

Technical Analysis of The Summer Silver Market

As our loyal readers will know, we are calling for a major move upwards in silver prices at the end of the summer. Tomorrow is the first day of August and so we thought it fitting to undertake some technical analysis on where silver prices are at the moment and where they are going in the near future.


The Bollinger Bands for silver are starting to move slightly closer together, marked by the orange circle, and as these lines come closer together, things look more bullish for silver. Bollinger Bands are a measure of volatility and volatility usually decreases before a major rally, so we will keep a close eye of the BB for a signal on when exactly the next rally will begin.

STO can still take more of a hit, down to below the 20 level before it begins to look bullish again. (Blue)

Note that on the MACD indicator the black line appears to have crossed down through the red, giving us a negative signal and suggesting that the fall back in silver prices is not yet over. (Pink)

At the top of the chart the Relative Strength Index has fallen a fair bit but could go to 30 or below before looking bullish again.

Silver prices are encountering some resistance shown by the black line and we would need to see silver prices getting above $13.50 again to see that trend line broken. Ultimately, silver prices need to make a higher high and a higher low for a truly positive signal. Not only would this break the resistance line shown on the chart, but if would also signal that a new short/intermediate term uptrend is forming in the silver market.

As we have said in previous articles, we see silver prices and gold prices making a serious breakout and running upwards at the end of the summer. Therefore, silver prices could build a decent base over the coming weeks ready to start their run in a month or so. If silver can start to form an uptrend before then, then that would be a very positive sign, but either way, this coming upswing in silver and gold will be quite spectacular in our opinion. We are sticking with our target of $20 silver prices and we expect to see these price levels by year end.

We think that now is the time to buy silver stocks, which will provide more leverage to the coming upswing in silver, and you can see which stocks we are buying on this site, in our newsletter and in our portfolio.

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