Silver – Fundamentals Never Say “When.” Charts Do, And It Pays To “Listen.”
Finally, a classic example on the importance of reading developing market information, as shown in this SILVER chart! That last bar on the weekly chart speaks volumes, a gap higher from apparent weakness. The odds of silver retesting 26 have increased dramatically.
We often mention putting developing market activity into a context as it is the vital step in preparation for when a market moves. The support-turned-into-resistance line is drawn as the market activity dictates, which most often in not simply a straight line, used for convenience and not necessarily accuracy.
The lower support/resistance line meant very little as price sailed right through 21. It shows the importance of how price reacts to an anticipated resistance. Obviously, when it goes right through, the market is telling us to expect higher levels. Silver is already testing the higher resistance line, just above 23.
The “D/S” designates Demand overcoming Supply, evidenced by the wide range up bar and on sharply higher volume. It could not be any clearer that demand, [buyers], took charge. 23+ may act as resistance, but that volume and rally getting there suggests it could be short-lived.
You can see the day of the gap that was shown on the weekly chart. That was one of the market’s stronger messages, emphasized even more by the next two days, a consolidation in the form of a rally and not just sideways, as normally occurs.
The first time we recommended the long side in silver is indicated, based on a short-term read of developing market activity, back then. It is included as background to inform that the buy signal from last Thursday was not the first, but it was a much better one.
Timing for buying silver that day, just as with gold, was very short, and one had to respond on instinct and not sit back to assess the developing information. That “instinct” actually comes from the necessary preparation work and not simply “shooting from the hip.” As the steps were shown in gold, they existed for silver, but silver had been stronger from the “signs” indicated.
As a rule, a trading unit is a minimum of two contracts to enable “half-position” action. Silver reached a potential resistance area on Friday, and taking partial profits on a half- position was warranted. If price moves higher, the other half still gains. If price corrects lower, the “locked-in” half-position takes advantage of a higher prior to a potential correction. This is a form of money management, on our part.
It is not always this clear, but when the market “talks,” we listen, for a reason.
We choose now for buying and holding physical gold and silver. We are on the long side in gold futures, but that can change on any given day.
Michael Noonan, of Edgetraderplus, is a chart analyst with 30 years experience in the futures markets. His focus is entirely on reading developing market activity in the form of price and volume, to better understand what the markets are saying coming from what is the best source of all information: the market itself. His website is http://edgetraderplus.com.