Sunday, June 5, 2011

Silver - Rising Triangle Formation & 50-day SMA

An updated silver futures chart is provided below with the addition of a bullish ascending triangle formation that terminates near the end of June 2011. Based on the recent dip buying, steady volume, and gold's resilience, I would expect a break upward into the $40s by the end of June. Notice that the top portion of the triangle coincides with the flattening 50-day SMA, which has been acting as resistance. Essentially, we'll have up to three weeks until the trend moves decidedly upward or the triangle formation is broken and we continue to consolidate sideways in time.

With that said, the next FOMC meeting takes place June 21st-22nd and QE3 expectations will be brought to light within the same 3-week time frame as the ascending triangle develops. Overall, there is the potential for a very strong breakout should the bullish triangle hold, and the continuation of QE is confirmed by the Fed. Even the willingness to continue QE should provide the catalyst for a fast breakout move similar to what was seen in August of 2010.

Figure 1: Silver Futures, SI_F, daily chart with prevailing "QE trend" (orange), 50-day SMA (purple), 200-day SMA (dotted purple), Fibonacci retracement (cyan), and ascending triangle (bold gray).
Recap
1. Bullish ascending triangle formation, 
2. 50-day SMA acting as resistance, 
3. Expect move into $40s by July, 
4. FOMC meeting June 21st-22nd 2011, 
5. Gold & Silver options expiry June 27th 2011.

Price Expectations 
1. Resistance at roughly $39.00-$39.50,
2. Lower support at $32.50-$33.00, possible support developing around $35.00-$35.50,
3. Consolidation in the $33.00-$39.50 range, or breakout into the $40s. Conditions seem to favor breakout into the $40s.

Overall, the next month will be a defining period for the silver market. Stay tuned...

-------------------------------------------- Update: 6/9/2011 -------------------------------------------- 

Figure 2: Silver Futures, SI_F, daily chart with prevailing "QE trend" (orange), 50-day SMA (purple), 200-day SMA (dotted purple), Fibonacci retracement (cyan), and pennant formation (bold gray).


-------------------------------------------- Update: 6/13/2011 -------------------------------------------



Figure 3: Silver Futures, SI_F, daily chart with prevailing "QE trend" (orange), 50-day SMA (purple), 200-day SMA (dotted purple), Fibonacci retracement (cyan), and broken pennant formation (bold gray).


The pennant formation has been broken and we'll have to wait and see if $32.50-$33.00 is the next target. It looks as though we have entered into a shallow downtrend in the short-term, or a consolidation phase around $34-$35.

No comments:

Post a Comment