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Silver Forming A Buy Signal

May 10, 2011 6:08 AM ET
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The LFB's Blog
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News wires are still covering the increase in bullion margin requirements required to hold physical gold and silver positions as a reason for recent price declines, along with manipulation by major institutions caught on the wrong side of this year’s bullish moves higher in precious metal valuations. TheLFB client note updates highlighted that moves lower may soon start to be reversed, and that is what seems to be happening as support areas hold steady. Any short gold or silver positions should be closed while recent price action is absorbed.

A tradable call to action was sent to clients this week, via a trade signal to subscribers that gold bullion breaking above 1506 could be sustainable if global equity and risk markets found buyers. The initial target was 1515, which was close to being hit overnight. Silver set up a potential trade signal to buy from 37.00, but failed to confirm that both potential and momentum would be strong enough to easily follow through. Updates will be emailed directly to subscribers if silver breaks 38.20, which will trigger upside potential towards 39.30 and 42.90.

Sentiment towards bullion trade remains bullish overall. Price action favors a bounce off support that buys the recent dips on both GLD and SLV (the exchange traded funds for gold and silver bullion trade). Caution is required if looking to sell gold or silver bullion, as TheLFB trade desk is not expecting a collapse of gold and silver values below 1460 and 32.50 respectively.

Price Action:
There was strong buying activity in March around 1490 on gold, and 33.00 on silver, which are now potential areas that will get bought if near-term support is broken. These swing point areas, where a near-term trend forms and price action reverses previous trade direction will be closely monitored and trade signals sent to subscribers as things unfold.

The daily trading range is $19 on gold and $1.20 on silver, which are above the historical norm, and indicate that volatility remains high. The 50-day Simple Moving Average (SMA) on gold is @ 1458, and @ 42.00 on silver. The 20-day SMA on gold is @ 1501, and @ 38.70 on silver. Gold bullion trade has a 36-month 75% correlation to the euro currency pair (Eur/Usd).

Trade Plan:
The detail below will help guide traders with analysis on intra-day price movement, trend, and momentum. Content provided by TheLFB Trade Plans.



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