Cash Silver Consolidating – Silver Performance In August 2011
At the end of July, the buysilver.org video report looked at the silver price since it came crashing down at the beginning of May.
It’s time to ignore the latest economic and stock market turmoil, and concentrate on the technical aspects of the price action in the cash silver markets over the last couple of weeks. It was Alan Greenspan who made the phrase “systemic risk” in vogue. Perhaps only now is the world really seeing what he meant. Anyhow, buysilver.org have covered this in the blog post of Saturday 13th August, and suggested a way that stock investors may profit in these turbulent times.
Recapping the observations from the end of July, on chart 1, a head and shoulders pattern being was formed centred around the beginning of June, swiftly followed by an inverse head and shoulders at the beginning of July.
These technical patterns gave rise to key support and resistance prices of $36.90, $38.90, and $41.20. Remembering back to the video of end July it was stated that, after the recent volatility in the price of silver, it would be important to see some sort of a consolidation phase taking place. It was predicted that this would last for a few weeks before the next breakout is seen.
A breakout on the upside would be preceded by three days closing above $41.20.
At the time, it was also said that there seemed to be a strong support line forming around $38.90, but with major support seen at $36.90. This is a level that has its foundations in importance all the way back through March this year; just prior to the upward move in April to just below $50.
Moving on to Chart 2, it can be seen what the silver price did during the first week of August. Over the week as a whole, silver remained fairly stable. But the price movement during the week is important. On the 3rd of August, silver moved above the $41.20 level that is rated so highly, and closed above it for the first time in almost three months. But it couldn’t stay there, and the following day profit takers came in and drove the price south, testing the $38.90 support and trying to move further south. For two days silver closed lower, before ending the week above the $38.90 level.
On to the week just closed (Chart 3).
Silver is seen a little more stable, with a price range of just over $3.
The upside resistance of $41.20 has not been tested again, but the bears did try to take the price down, most notably on Tuesday when the low of the week was hit at around $37. But there was an immediate reaction at this level. Short closing around this support level of $36.90 drove the price higher, and is a good indicator that this may now be the new bottom.
At the end of the week, the price finished pretty much where it started, at a shade over $39.
Consolidation within the target range is being seen, as predicted at the end of July. This phase could go on for a little while yet, though it is possible for the earlier year highs of around $50 to be tested in October/ November this year.
Remember, before making any decisions, a silver investor should always conduct his own research, and remain vigilant in this difficult investment climate.
