Silver Approaching Range Support; Failure Can Lead to Double Top

Silver 4H chart 9:15PM EDT 10/10/2012

Near Range support: Silver has been trading sideways since 9/13 as seen in the 4H chart. There was resistance above 35.00 up to 35.38. The 33.28-33.50 area provided support. In this 4H chart, the 200SMA has caught up to this support area as well. The RSI shows bearish momentum in the short-term. As the market focuses in on this support area, the question is whether it will hold and get back in the direction of the recent trend, which is up.

If range holds, a conservative target is at least back to the middle of the range, which is around 34.45-35.50.

Double top? If this range support does not hold, the daily silver chart shows a double top formation. A 38.2% retracement to 31.83 is a conservative target for completion of a double top. 31.25 is a pattern breakout projection, and 30.74 is 50% retracement near the 200-day SMA. These represent 3 possible targets that are progressively more aggressive.

Seeing that the 200-SMA is flat, we know that the overall trend in the daily chart has been sideways, making a stronger case for a reversion to the mean type of market. But just in case the market has it in it to maintain bullish momentum in the daily chart, when the daily RSI gets near 40, we should also monitor for support.

Silver Daily chart 9:16PM EDT 10/10/2012

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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