Silver Forecast for April 27, 2012, Technical Analysis

 

The silver markets rose during the session on Thursday as the hammer from the previous session got broken to the upside. Yesterday we mentioned that this would be a decent buy signal, and in fact we have taken it. However, the area does face some headwinds just above – so this is a short-term trade.

The silver market have been beaten up pretty badly over the last several weeks, but the $30-ish level is a massive support level based upon the longer term charts. The bears will have to get past this barrier to completely take control, and as a result – this area is absolutely vital to the overall health of the silver markets.

The $33 level above is the top of the most recent consolidation area, and that is where we think the market will head towards now. However, it is somewhat in doubt as to whether or not the market can overcome the level as there are many reasons to think that there could be trouble moving forward for the silver market.

For starters, there are industrial concerns. The silver market is driven by many factors, but it is hard to think that the industrial use of silver is vigorous as the economies around the world stagnant, or even fall into recession like the United Kingdom has. In this kind of environment that the world seems to be stuck in, it is going to be difficult to justify the expansion of the industrial metals in general. Obviously, metals like iron and copper will probably be a bit more vulnerable than silver, but they will all suffer in general. The silver market does have the advantage of being a precious metal – but even that can only take it so far.

Because of this, we are playing the market as if it were stuck in a range between $31 and $33, and will continue to do so until proven otherwise. The breaking of the $30 level to the downside has us aggressively short when and if it happens. With the market acting the way it has lately, that move wouldn’t exactly be a surprise.