Silver Daily Technical Outlook

Oil N' Gold Team from Oil N' Gold at 12/09/09

Comex Silver (SI)

Silver's fall from 19.50 is still in progress and the break of 17.70 support suggests that whole rise from 16.12 is finished. Intraday bias will remain on the downside as long as 18.375 minor resitsance holds and further fall should now be seen towards 16.12 support next. on the upside, above 18.375 will turn intraday bias neutral and bring recovery. But after all, risk will now remain on the downside as long as 19.50 resitsance holds.

In the bigger picture, there is no confirmation of medium term topping in Silver yet but the risk of reversal is growing significantly. Firstly, as note before, whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, upside is expected to be limited inside this 19.55/21.44 resistance zone and bring another medium term fall. This 19.55/21.44 resistance zone as just missed. Secondly, strong resistance was seen in the upper trend line and silver has failed to sustain above it last week. Thirdly, upside momentum is clearly diminishing with bearish divergence conditions in daily MACD and RSI. Fourthly, rise from 12.435 has apparently completed a five wave sequence at 19.50.

Therefore, while another rise cannot be ruled out, we'll be cautious on reversal signal even in case of another rise and believe that upside potential is limited, at least in near term. On the downside, sustained break of 55 days EMA (now at 17.51) will be an early signal that rise from 12.435 has completed and break of 16.12 support will confirm. This will also be an important signal that whole rise from 8.4 has completed and we'll then turn focus to 12.435 support for confirmation.

Comex Silver Continuous Contract 4 Hours and Daily Charts