George Leong: Silver is in a coma at this time, stuck below $30.00 and both its 50- and 200-day moving averages (MAs). Yet for traders, prices can easily spike on any firm sign of a sustained global economic recovery, since the white metal is used in numerous industrial applications,including in the pharmaceutical, technology, jewelry, and industrial areas. Traders can also watch for buying from India and China. (Read “China: This is Your Time!”)
With signs of a sustained economic renewal in the United States, don’t be surprised to see the demand for silver ratchet higher. The uncertainty is the timing of the move.
Yet with silver currently doing very little, sitting below $30.00, it may be time to begin looking at the white metal as a possible upcoming trade back above $30.00.
Silver has been declining, caught in a sideways trading channel since September 2011, based on my technical analysis. Over the past year, the metal has made a new high only nine times, but in that same timeframe, it managed to make 15 new lows. Shortening the time to six months shows an even worse scenario, with 19 new lows and only two new highs.
As you can see in the chart below, spot silver has absolutely no support at this time; but this will be tested, as it heads toward a key support line, as indicated by the lower horizontal blue line in the chart.
As it has appeared numerous times in the past few years, silver looks set for a bounce back up past $30.00 to the $35.00 level, as it did in 2011 and 2012. Should this happen, it could mean a bounce of 25% or more. Of course, playing silver futures could multiply the gains.
For the white metal to advance higher, we need to see a strong move back to the 50-day MA of $29.68, the 200-day MA of $30.73, the 13-week high of $32.45, and then to the target 52-week high of $35.48. The relative strength is extremely weak and will need to gain strength.
Chart courtesy of www.StockCharts.com
For traders, an upward move could see silver prices take another run at $40.00, along with the $50.00 level reached in April 2011, as indicated by the blue oval on the chart above.
The reality is that the trading in silver is often rapid, so you need to be on top of the chart.
The bottom line is: just like copper, which moves in relation to the economy and gross domestic product (GDP) growth, the movement and direction of silver are dependent on the global economy.