Silver: More Industrial Metal than Precious metal

All time high: $49.80    Low after that: $18.60
High after that: $25.12        Low after that: $18.72
Current rate: $21.84 (at the time of writing)

After hitting all time high of $49.80 in April 2011, the prices of Silver came down crashing to the levels of $18.60 in June 2013. From those lows we saw a technical bounce back till the $25.12 levels. As it was just a technical bounce back, this was supposed to happen after such a sharp and continuous fall from top. So a revisit towards
the bottom was natural and it took shape in December 2013 with the rates falling to $18.72 levels.

Now if we look at the moving averages in the charts we find that near term moving averages like 13 DEMA and 55 DEMA are well below the long term moving average of 200 DSMA.

This normally does not speak well for the long term scenario. It is so because 13 DEMA is @$20.49 which is well below 55DEMA which is @$22.79. And both of these averages are much much below the long term 200 DSMA of $28.15. So even though we have seen a double bottom like situation on long term chart it is still not in comfortable position and a continuous up trend in long term is, at present, seems distant possibility.

RSI on long term chart is trying to move in the positive territory but that indicates an up move in short to medium term only followed by sharp correction. We shall discuss the levels of resistance here next.

Now this is Daily chart (Candlestick pattern) of silver of last one year. Here we can easily see that RSI has moved in to positive territory and that indicates that in short to medium term we are going to witness some quick moves in the rates of this commodity.

This view is also been supported by short term moving averages. 13 DEMA is @$20.38 and 55 DEMA is @$20.18 absolute near term average has cut the absolute next to near term average positively.

On Japanese candle stick patterns also we can see one large green candle supported by very good set of volumes. All these factors indicate that chances are very bright that in near term we may see a surge in price of this commodity.

This also support the trend indicated by long term charts which we discussed on previous page.
A falling trend line if connected from the top of $25.12 is drawn towards downside, then this trend line is also been breached positively supported with good volumes in last few daily trading sessions.

But here we should keep in mind that there is a falling gap still intact between $26.50 and $25.50 making it a strong resistance area.

After discussing technicals, we shall now look at the near term resistance area and rates. Chart shown above helps us in finding that very easily.

There is very strong range of resistance here from $21 to $23 as clearly visible in line chart as above. It will not be so easy for the commodity to cross this band in one attempt. So we will see some good correction from the top end of $23. This correction may take the rates to $20.5. But after correction we may again witness an upside move which may take the price to $25 levels.

And from the top of $25 if a correction takes place and the prices do not go below $21 then it has potential to attempt the rates of $27.

With charts indicators at present what we can justify is the moves up to $27 only. As long term charts needs to turn positive for next round of analysis.

In any case in down move rates of this commodity should not breach $19 mark or else it could be disastrous for the commodity as there will be a free fall till $15 if this happens.

-Rajkishore Bang
Astro - Tech Analyst

No comments: