Silver futures started the year on a low note, touching 29.20 before setting up a bullish trend, reaching highs of 32.47 in January. With all the hullabaloo about the US fiscal cliff and the debt ceiling, it was only but obvious for silver prices to head higher. With the dust being temporarily settled, silver futures saw a decline after reaching the monthly high of 32.47.
In the picture below, we have the Andrew’s pitchfork drawn up on the daily chart along with the monthly pivot points. Price has been moving quite smoothly along the median line but failed to reach the upper median line. It is around the same region that we have the monthly resistance 1 at 32.68. Later the price zoomed through the median line with the next candle opening lower than the median line, indicating a further drop in the price, at least for the first two days of the coming week.
Silver closed at 31.15 on Friday, near the monthly pivot region of 31.13. This gives us the outlook that silver prices could potentially drop, at least during the first half of the week. Expect price to range between 31.35 and 30.65.
Below is the same daily silver chart with Fibonacci lines. There are two possible outcomes. The price is currently at the 38.2 Fib. A bounce from this level to the upside could see price rally all the way up to 61.8 Fib which is 32.41. However, if the price continues to drop, then expect to see support at 23.6 Fib which is 30.43.
Below, I have another chart, on the 4 hour time frame. Here, we only have moving averages, 5, 21 and 63 days. As you can see, there was a clear signal to go long as well can exiting the long position. Going long at 30.481 and exiting at 32.069. Looking at the way the moving averages are positioned, should the 21 day moving average cut across the 63 day moving average from above while the 5 day moving average remains below the 21 day moving average, it would be a clear indication to go short.
Come Wednesday and we will see lot of economic data coming out from the US. Read my previous analysis on the USDCHF here to see what’s in store.
Over all, from the perspective of trading silver, it is likely that the first part of the week will see a drop in prices until Wednesday. Mixed data (lower outlook on Q4 GDP, stable unemployment rate and modest increase in unemployment claims) along with the FOMC statement where Bernanke is likely to validate his point on continuing the QE is likely to push Silver prices higher. In the same note however, a possible hint at tightening the monetary policy will see silver drop. All in all, keep an eye out on silver during this week as a potential downside ‘could‘ form giving us a good opportunity to go short.