Have Silver Prices Bottomed Yet?

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Includes: SIL
by: Bob Kirtley


(Click to enlarge)

Greece, the tinpot tail of Europe appears to wagging the economic dog of Europe at will as their inability to appoint a pro-austerity government has failed. This situation is further exasperated by France, with its newly elected 'no austerity' leader, stating that he will spend more now and not less in an attempt to boost economic activity if France. The German Chancellor, Angela Merkel, is now toast after suffering a significant blow as voters in Germany's largest state rejected her austerity policies.

Europe is fragmenting at an alarming rate with confidence being rocked on a daily basis and the euro taking a drubbing. The main beneficiary appears to be the U.S. dollar, for no other reason than it is an alternative position to take.

The fall out from all this uncertainty is also taking its toll on both gold and silver prices, along with the associated producers as we watch them drift ever lower. For those of us who own these assets its hard to stomach, but for those who have yet to enter this tiny market sector or who wish to increase their exposure to it, it appears that a fabulous buying opportunity lies ahead.

Taking a quick look at the chart we can see that the 50 day moving average (DMA) didn't make the cross over of the 200dma, that we were hoping for and so the pressure remains on silver prices. The drop below $30.00 that we have alluded to has now happened. We see this as at or close to a possible buying opportunity, however it could go as low as $26.00, so it could be worth the wait for slightly better prices.

Also note that the RSI has dipped below the '30' level which is usually a sign that silver is oversold and that a bounce could be on the cards. This is not always the case and it can't be relied totally, but it does suggest that the selling is overdone at this point.

In terms of actionable data we are not too keen on the mining sector at the moment as they could well be sold off should there be a general sell off in the major market sectors, a case of the baby being thrown out with the bath water. However, if we do get to see lower silver prices then there should be an opportunity in the options arena for us to take advantage of, something that we are researching in an attempt to unearth some real value.

Stay tuned for further developments.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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