-- Posted 26 April, 2009 | | Discuss This Article - Comments: Source: SilverSeek.com

Although it dropped a little below its mid-March hammer low, silver held above the key support identified in the last update, with its rally last week taking it away from the danger zone and opening up again the prospect of an upside breakout from the large Cup & Handle reversal pattern, that should lead to a strong advance. The fact that this support held, combined with the clearly defined downtrend that forms the Handle of the base pattern gives traders clearly defined parameters. An advance above $13.20 would involve a clear breakout from the downtrend channel and should mark the start of a breakout from the entire base area, leading to a new intermediate uptrend that takes the price initially towards the strong resistance above $16.50, with a pause at the lesser resistance in the $14 - $14.50 area along the way. On the downside, the support level shown in the $11.60 - $12.00 area must continue to hold, so stops can be placed below it, or below the lower red trendline if this is lower. The fact that silver dropped to a new low about a week ago has necessitated a slight redrawing of the Handle of the Cup & Handle pattern, which has been extended down and to the right. However, this has resulted in a more elegant Cup & Handle of the type commonly used at about 3.30 pm in England for afternoon tea.

 

If we see a combined breakdown by both the dollar and Treasuries soon, as described in the Gold Market update, which is looking increasingly likely, then we could see surprisingly strong gains in the Precious Metals sector that would be expected to involve gold breaking out to new highs with silver taking on and possibly overcoming the strong resistance above $16.50 and towards its highs.

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