Silver markets have initially gapped higher during the open on Monday to kick off the week, but then pulled back to find support at the bottom of the gap. By turning back around, we have seen a very bullish candlestick, as we have reached towards the highs of the last couple of trading sessions. At this point in time, it seems like it is only a technicality as to whether or not we can break out above the $20 level. If and when we do, it is likely that the market goes looking towards the $30 level above which of course was the large, round, psychologically significant figure that caused a lot of selling pressure.
To the downside, the $25 level continues to be rather supportive, as we have seen a nice hammer form there before turning back around. By doing so the way it has, it suggests that there is plenty of buying pressure in that area and that we should think of that as a bit of a “floor in the market” going forward. The $25 level course has a lot of psychological importance around it as well, so it is not a huge surprise to see that it has held up.
I believe it is only a matter of time before we not only reach towards the $30 level but break above there as well. This makes sense considering that the Federal Reserve is doing everything that they can to bring down the value of the US dollar, and therefore should push up the value of most commodities, especially precious metals as they tend to move counter-cyclical to the greenback. With all that being said, this is a market that I think has simply had a strong correction, something that was desperately needed.
If we were to break down below the bottom of the hammer from last Wednesday, that would be a very negative sign, but I think it is only a matter of time before the buyers will return then as well. The 50 day EMA is currently at the $22.29 level and rising quite nicely. This has been a significant pullback followed by a very strong showing of stability, and therefore I think now that a lot of the “weak hands” have been flushed out of the market and we can start to build up momentum again.
