I just wanted to do a quick follow-up on silver. A few weeks ago silver appeared to be reversing lower only to rally back up to resistance. Presently, it seems that silver has reached a point of reversal again.
Please review the following chart of silver with my added notations:
The first thing you will notice is the up-trending resistance line I have drawn. Silver had hit an intraday high of $29.34 a couple of weeks ago, which was at the trend line, but silver actually closed at the trend line on Monday. If silver’s history holds to form, a reversal in silver is to be expected.
If you are looking for a possible re-entry point for a long position on silver (or SLV), please analyze the next chart:
In the short term, silver has been bouncing along the up-trending support line I have drawn. You will also notice the large Bearish Engulfing candle pattern (please review http://www.themeshreport.com/2010/11/are-silver-and-gold-done/ if needed) that formed yesterday. If silver meets the up-trending support line again, might that be a point of entry? What if that trend line were to break?
The Tale of the Tape: Silver appears to be showing signs of a reversal again. The silver commodity has approached a long-term resistance, while forming a common reversal candle pattern in the process. Silver should be expected to move lower and probably approach the short-term up-trending support line. If/when that support line is met, entering a long position on silver or the SLV could be considered. However, if silver were to break that up-trend line, taking a short position on silver or SLV would be the higher probability trade.
Waiting for the most opportune times that I have outlined above could provide you with higher probability entry points. No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.
Christian Tharp, CMT