Sunday Evening 5 June 2011
Since we previously identified a potential trading range, daily chart,
it is confirming that the decline from the April high has changed the
short-term down trend into a trading range. What we want to point
out are the last three red volume bars, indications of lower closes
and typically assigned as "sell" days. The question to ask is, if
there is selling activity going on, where are the results?
The last bar shows evening activity. The second to last bar is
Friday results. A third day of lower lows, but look at the close...upper end of the range, telling us that buyers were present to drive
price up by the end of the day, and the close was barely below that
of Thursday. It looks like downside progress is being arrested.
With price being in the middle of a trading range, and that is where
the level of knowledge is at its lowest, for price can go in either
direction and not violate the trading range high/low, we can still
garner a piece of information. The low held the 50% area on
Friday, and whenever price holds a half-way retracement,
it indicates a degree of strength in otherwise neutral territory.
We showed this chart in the last article, [See Silver - Keep Buying
The Physical, click on http://bit.ly/kwffb2 third chart]. One point to be
made here is when we mention areas as opposed to specific prices.
The 36.25 area was identified as a level of support. Price went lower,
seemingly "violating" that support, but what happened, in the process?
Note how the highest volume bars, intra day, take place at the lows.
If smart money were selling, would they be selling at the lows. No!.
Smart money sells near tops and buys near bottoms. At recent
support and at a 50% retracement level, this qualifies as an area of
support. That fact that price went so far through a support area and
closed well, tells us that sell stops from weak-handed buyers who
were long, exited when the "support" area was "violated."
Buyers were taking all that was offered. In fact, as of Sunday
evening, buyers are willing to "pay up" as price has rallied from
"broken support." It [support} is an area, and nothing was really
broken that produced damaging results. As price rallies, this forces
those who may have gone short and new buyers to pay at higher levels.
Price is still within a trading range, near term. Longer term, the
trend remains string, spacing still exists, and buying breaks remains
the plan. If margins are too rich, and they are not for the feint at
heart or the thinly capitalized players, stick to buying the physical
bars and/or American 1 oz Eagles, a truly beautiful coin.
Stick to the plan .