First and foremost, let me state that I currently have no position in silver. No options. No futures. Nothing. I am patiently waiting for silver to break back above $40 before I spring into action. However, many of you have requested an update of the silver charts so here they are. Again, if you must trade, always trade the doldrums with extreme caution. Otherwise, you're going to get your head handed to you.
We should always start our analysis with a long-term chart so below is a daily silver. You can see a number of things here but, for this discussion, the most important item is the obvious support around $32 and just below. You can see why I've always maintained that the people calling for $28 or $22 silver are nuts. No way it goes that low.
Now, let's start shortening things up. Below is an 8-hour chart. Here you can see the double-top back in late April as well as the panic bottoms near that all-important 32 level. To me, there are three, significant levels here that silver needs to best before I buy.
1) The first reaction high of 39.45 set on 5/11/11.
2) The trendline off of that high which currently rests near 37.40-50.
3) The shorter-term trendline off of the failed attempts from late May to take out 39.45. This resides near 35.60.
Next, here's a 4-hour chart. You can see the shorter-term trendline very clearly here. I've also drawn in the longer-term line in dashes. Silver is now above its first hurdle. Can it stay there? This is very important. Watch this very closely today and tomorrow.
Coming down to a 2-hour chart, we begin to get a feel for the short-term action. Note the very nice looking double bottom at 33.40. Sometimes you hear the term "W" bottom, well here is a textbook example of one but it comes with a warning. It is now very important that silver gets above the left side of the "W". That level is 36.79. If it does, a bottom for the doldrums should be in and the stage will be set for a test of the next trendline and then 39.45. If it fails, the doldrums will continue and the breakout will be postponed for another couple of weeks as silver churns in a range between here and 33.40.
Lastly, here's a 15-minute chart. It appears that silver needs to maintain its footing above 38.25-30 if it's going to have a run at 36.79. I have a last of 36.34 so it appears to be doing just that. Crude is up almost $2, too, at $98.50 so that should help.
So, in closing, silver may be in the process of bottoming and breaking out of the doldrums. It also might not be. The main items to watch are:
1) Can silver get past 36.79?
2) Can it then break the longer-term trendline near 37.40?
IF it can do those two things, I'll start getting ready to buy. WHEN it finally takes out 39.45 and heads back above $40, I'll jump back in with both feet. Until then, I wait and watch. TF