Silver Forecast April 26, 2012, Technical Analysis

The silver markets fell for much of the session on Wednesday as the “risk off” thesis came into play. The Federal Reserve statement failed to mention any real thoughts of quantitative easing, and the precious metals sold off as a result. However, during the news conference, Dr. Bernanke managed to suggest several times that the Federal Reserve was willing to continue easing if the economic situations warrant it. In the end, it seems that the market participants that were looking for clarity will have to keep on looking, as the Federal Reserve’s new transparency policy seems to be fairly opaque, or perhaps it is because of the Fed’s underlying uncertainty that we have this situation.

What should be noticed is that the daily candle for the session has formed a hammer, and also right on the $30 level mark. This area has long been a site of support, and in fact we have looked at the $31 level as a start of support – all the way down to the $30 level. What this essentially means is that the strongest part of support is being tested, and it has held so far.

The breaking of the top of this hammer would have this market in the $31 area, and this looks like a classic buy signal to us. Because of this, we are willing to buy if we break above the highs for the Wednesday session. Conversely, a break of the bottom of the Wednesday session would be a hammer getting violated, as well as a break of a large round number. This of course would be very bearish.

On the breakout to the upside, we are a bit quicker to go long than we are to sell. In fact, if we get that sell signal, we will do so only on a daily close sub-$30. Until then, we are simply waiting, but it should be noted that the area certainly looks like a good spot for a bounce in this market that has been bullish for a few years until only recently as the last decade has been so strong.