A Short-lived Pause in the Silver Rally is More Than Likely

By: Przemyslaw Radomski, CFA | Tue, Jan 17, 2012
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Based on the January 13th, 2012 Premium Update. Visit our archives for more gold & silver analysis.


 

Our last week's comments on the possible rally in gold (January 13th, 2012) are still up to day, so we will begin this essay with a quote from the aforementioned essay and then we will move to the silver market.

(...) we see that gold is about to reach the upper border of the declining trend channel and its 50-day moving average. We could see a pause and possible consolidation around this $163 price level. The outlook will remain bullish here unless a top forms and a decline is seen on significant volume. On the other hand, if the decline takes place above the $163 level and takes gold no lower than to this particular level, it would be a very bullish development and we would likely consider adding to long positions.

Because both the silver and gold short-term charts have similar implications regarding a short pause (however based on different factors; these factors are discussed in more detail in our full analysis), it is more probable that we will see just that.

As mentioned earlier, today's technical part is devoted to silver. We'll start with the analysis of the very long-term chart (charts courtesy by http://stockcharts.com.)

$Silver Spot Price

In the very long-term chart for silver, we begin by reemphasizing the importance of a recent development. Silver bottomed right at the very long-term cyclical turning point and prices have moved higher since. The lack of any additional declines has clearly confirmed that the bottom is in and greatly increases the odds of a rally from here.

This appears to have been a major bottom, perhaps as significant as the one seen late in 2008 which was followed but what could be described as pretty much a two and one-half year rally with prices rising more than 500% through early 2011.

Silver breakdown

In the second very long-term chart (if you're reading this essay at www.sunshineprofits.com, you may click on the above chart to enlarge it), we see that the bottom appears to be in here as well, and silver's price is close to a resistance level which is indicated above by the rising red line. This line also coincides with the 10-week moving average (green line). The RSI level also suggests that the bottom is in, but we prefer to see an additional move to the upside - above the resistance levels - before calling the situation more bullish than it is right now. It is bullish anyway, but at this point we see no reason for increasing the size of the long position.

SLV iShares Silver Trust

Looking at silver's short-term chart, it seems that a consolidation is possible here as we are fast approaching a cyclical turning point. One possibility is that we could see a local top followed by a correction, a bottom, and a subsequent rally. It might be similar to what we've seen at the end of November 2011, only this time it would be a pause during an upswing.

Summing up, silver's medium- and long-term outlook is bullish. From the short-term perspective, a consolidation or pause in the rally appears likely.

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Thank you for reading. Have a great and profitable week!

 


 

Przemyslaw Radomski, CFA

Author: Przemyslaw Radomski, CFA

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website - SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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