For silver investors, as indeed for gold bugs, it’s been a long hard road back as the metal continues to struggle to find any bullish momentum in the longer term, with each minor rally duly stalling and then reversing to pick up the longer term bearish trend once again. The most recent rally for silver was initially signalled in the penultimate week of August, with the ultra high volume associated with the wide spread down candle but one with a deep lower wick, sending a clear signal of stopping volume and consequent buying. This was duly followed by two weeks of classic price action with the remnants of selling pressure being absorbed in the consequent ‘mopping up’ operation, with the metal subsequently moving higher in the first week of October on high and rising volume coupled with confirmatory price action. However, last week’s price action has once again cast a shadow over this short term bullish phase, with the candle closing with a deep wick to the upper body on rising volume. This is a clear sign of weakness, and setting up for a potential move lower once again, back to test the platform of support in the $14.40 per ounce region. In addition, the high of last week tested the volume point of control, a level which capped the rally over the last three weeks.
This bearish tone has also been confirmed with the arrival of a pivot high on the candle of three weeks ago, adding further to the negative technical picture, as well as contributing to an increasingly gloomy outlook for silver investors. The exhaustion of the rally of the last few weeks should come as no surprise given the extent of price congestion overhead which extends from $15.80 per ounce through to the dizzying highs of $18.60 per ounce – a level not likely to be reached in the short term. For the week ahead, we can expect to see further weakness for the industrial metal, and should the potential support region of $14.40 per ounce be taken out in due course, then this will open the way for a test of the $14 per ounce region, last seen during the stopping volume phase of late August.
By Anna Coulling
Charts by NinjaTrader and trading indicators from Quantum Trading