Sunday Evening 18 September 2011
In our last article, [Silver - Instant Gratification v Patience, click on
http://bit.ly/qeYG0o], we advised being a market follower, letting it
lead as it provides the purest information, it being the final arbiter
between buyers and sellers. All available information, technical
and fundamental, gets distilled in final decision-making that show
up in both price and volume. What is always important is how the
market reacts around certain areas, and we noticed where price
had been stopping, so we looked a little closer at the daily to see
Around the 8th of August there was a swing slow. After the high
around $44, price sold off on very strong volume. Three points of
information that the market has provided as clues are: The sell-off
was on wide range bars, showing ease of downward movement with
sellers in control; volume increased sharply; and, there was no
further downside follow-through. With these market factors, the
market stopped above the last low, making it a higher swing low.
A logical conclusion to be drawn from the observable facts are the
volume and stopping action were attributable to support.
On Thursday, second bar from the end, the range was wide to the
downside with a close on the low end. Such close can sometimes
signify exhaustion, and price also held the reverse support line,
which had been respected on two previous occasions, and if it held,
silver would be making yet another higher swing low. Higher swing
lows are signs of a potential turnaround, so we took a closer look
at the intra day activity, Friday morning.
In the 20 minute chart, note the higher volume from the 15th at
the lows, 39.40. It also made a small double bottom, right at the
same support trendline from the daily chart. With all that volume,
there should be downside continuation. As overnight trade
developed, there was a small higher swing low that led to a rally
by the opening day session. Where were the sellers?
There was a growing possibility that support would hold an a
greater rally could ensue. Price was at a danger point, and it is
at a danger point were the risk can be minimized. We bought a
small set-back at 40.10, with a stop under Thursday's low, a risk
of about 70 cents.
Price rallied for the balance of the day to just under 41 and closed
at the 40.80 level. That allowed us to raise the stop to 39.97,
making the risk 17 cents! At a danger point, the trade either works
or it does not. If it does not, a 17 cent risk in this kind of market is
more than acceptable.
The wait for results begins.