Technical Update for Silver

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Silver 4H chart 9:43AM EDT 9/25/2012

silver 9/25/2012 4H chart

From higher high to lower low: Silver was showing some bullish signs last week as it made new highs above 35.00, but was quickly rejected from clearing this level. The 4H chart shows the market failing to sustain the higher high with a higher low, and instead fell sharply below last week’s low at 33.78. Basically it went from making new highs to now making a new low.

Breakout: Another way to look at last week’s consolidation is a rising wedge, or diagonal triangle broken to the downside. This is a sign of topping. However the 4H RSI remains above 40, and therefore the bullish momentum that started in July is still maintained. Will this nascent sign of reversal (a lower low), lead to further corrective decline? If so, a projection to 33.00 and more aggressively to 32.45 is in sight for the short-term.

Pullback and momentum: It is a make or break as far as momentum is concerned in the 1H chart. We see that the RSI tagged 30, showing some nascent bearish momentum. If this momentum is to persist, the RSI usually stays under 60. At the beginning of the 9/25 US session, the RSI reading is tagging 60 as price action pretty much pulled back to the mean, 50% retracement of the 35.16-33.53 swing in confluence with the 200-hour SMA. A push above 34.55, with the RSI breaking above 60 would weaken the case for the bearish outlook. A break below 34.00 and a near-term rising trendline should extend the bearish outlook to 33.00, 32.45 pivots.

Silver 1H chart 9:45AM EDT 9/25/2012

Silver 9/25/2012 1H chart

If there is a throwback, which is possible with the 1H chart showing some overbought condition, as the RSI goes above 70. However, we should first monitor the 1775-1780 previous resistance area as a possible area of support. I think as long as the market holds above 1765, which is like a central pivot to this week’s range, then the bias is still bullish. The 1H RSI should hold the bullish bias. A break below 34.00 however suggests further consolidation, and maybe even a corrective bearish attempt to follow a false break to the upside.

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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