Last week the strong rally in Silver ended exactly at the 61.8% retracement from the bear market since the summer 2008 from the $21.44 low to the november low $8.40. I still find id amazing how precise markets can be at times.

Weekly Silver Trading Chart

Since hitting this important fibonacci level last week silver is down more than 8% already. Silver was quite overbought and a correction was expected. Normally corrections in gold and silver last 2-6 weeks.

Daily Silver Trading Chart

On the daily chart you can see that the RSI has already turned down and as well MACD is creating a sell signal right now. On top the 50 and 200 Moving averages (as possible support) are still quite far away. Therefore Silver should at least retreat to the 50-61.8% retracement levels within the next couple of days and weeks.

If $13.50 does not hold on a daily basis we will know that this is not just a correction within an uptrend. In this case I expect silver to test the strong support around $11.80-$12.80.

Besides the technical picture as well seasonality definitely does not favor any long positions at the moment. “Sell in May“ seems to be the right decision again this year inspite the ongoing longterm bullmarket in precious metals.

Daily Silver Trading Chart

As well the chart of my favourite silver mining stock SILVER WHEATON clearly shows the potential for an ongoing correction.
Between $10.80 and $12.00 there is massive resistance and prices broke down with increasing volume after running on top of the bollinger band.

The 50 and 200 Day Moving Averages are far away which is plenty of room for prices to drop further !

Therefore I think the chances are pretty high to see the share price for Silver Wheaton falling down into the $8.50 to $9.00 levels. Here we could find a very good setup for a reentry later this summer once the commodity market takes a breather.

You can recieve my trading analysis free each week if you like my view on the markets.

By Florian Grummes
www.TheSilverGoldSpot.com

Learn to Trade ETF's While Your Making Money Trading

© 2009 Copyright Florian Grummes - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.