Silver Forecast August 28, 2015, Technical Analysis
Silver markets bounced during the session on Thursday, using $14 as a bit of a springboard. This of course is a large, round, psychologically significant number, so that of course will attract quite a bit of buying pressure. With this, we believe that the bounce is simply going to be based upon the large round number more than anything else, and as a result there’s no interest on our part to step in and start buying silver. In fact, we recognize that there is quite a bit of resistance above, as denoted by the yellow box on the chart. After all, it is an area of previous consolidation, which should have some effect on the market as we approach that area again.
With this in mind, we look at the $14.50 level as been massively resistive, and as a result we think that anytime a resistive candle in that general vicinity should be a selling opportunity. We are looking for shooting stars, and long, red candles from that region in order to start selling silver yet again. Although we do believe that silver is massively oversold, the reality is that in the meantime it’s almost impossible to use any type of leveraged instruments to purchase silver. We need to think of this essentially as a “two speed” market, as the longer-term traders may look to buy physical silver somewhere in this general vicinity, but quite frankly as far as leverage is concerned, it can get very dangerous to hold. There is a lot of volatility, and with that we are very hesitant to try to go long even though we think eventually silver will rise in value.
With that being said, it makes sense to see quite a bit of resistance above, and as a result we think that a lot of traders are simply going to wait until we get to higher levels in order to take advantage of “value” in the US dollar as measured by precious metals. This is especially true and silver, considering that the market has a bit of an industrial component as well, as silver is not only a precious metal, but used in manufacturing of several different products. With the softness in the economies around the world, demand for silver is going to be very soft, and then of course the US dollar strengthening will work against it as well.