-- Posted 5 June, 2008 | | Discuss This Article - Comments: Source: SilverSeek.com

The positive implications of silver’s mid-May breakout from a pronounced bullish Falling Wedge downtrend channel have by no means been invalidated by the subsequent rather savage reaction that has got a lot of traders fooled into “thinking grizzly”. In the 1st place a post breakout reaction back to test support at the top of the downtrend channel is quite normal, and secondly the reaction has brought the price back down again to the zone of strong support shown on our 1-year chart, which is now being bolstered by the 200-day moving average rising into it. It is thus highly unlikely that silver will drop much further from here - on the contrary, everything is now in place for a major uptrend to develop soon, as is the case with gold. Due to the strong convergence of the boundaries of its recent downtrend channel, silver looks set to outperform gold on the next uptrend, not that gold looks weak here.

 

Despite remaining within the confines of its Falling Wedge downtrend channel until mid-May, silver has actually been basing since immediately after its mid-March plunge, and can be seen to have been trading in a rectangular range bounded by the support and resistance shown since that time. With the price now near the bottom of the range, silver is thought to be at an excellent entry point here, as it should soon break above its 50-day moving average, a development that should quickly lead to a very favourable price and moving average alignment, with the price above a rising 50-day, which is above a rising 200-day, a circumstance which typically exists at the start of a major uptrend.

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