-- Posted 13 July, 2009 | | Discuss This Article - Comments: Source: SilverSeek.com

Silver has been in a steep intermediate downtrend since early June, but there are signs that this downtrend may soon have run its course, or even have run its course already. On the 1-year chart we can see that having failed to find any serious traction near its 50-day moving average, silver broke lower again towards the important support level shown, which is expected to put a floor under the price, especially as the Cup & Handle formation shown on the chart is a strongly bullish pattern, although it is very possible that its downtrend will end around the current level as it has arrived at the trendline support of a longer-term potential uptrend channel, also shown. As it is becoming increasingly deeply oversold, it is logical to start increasing positions here and especially if it should drop further to approach the support level in the $11.50 - $12 area. However, the importance of this support level means that long positions should be closed out, scaled back or protected with options etc in the event that the price breaks clear below it, as this would be expected to lead to significant further decline.

 

The COT chart for silver suggests that the time is not yet ripe for a major uptrend to develop or for a serious challenge of the highs to occur. What is therefore likely to happen is that a trading range develops for some weeks and perhaps a month or two between the support and resistance levels shown on the silver chart.

 

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