Friday, May 20, 2011

Silver at a crossroad

Hi guys, I'm back. Before talking about the market in general let's look at the hottest trade right now, the silver. After an insane rally and an equally insane plunge silver is trying to change directions again.

EMA 25-EMA 50 pair on 30 minutes chart worked very well in the last four months. Also SMA 85 seemed to offer an excellent support during the uptrend and a resistance level during the downtrend. Right now price moved slightly above SMA 85 and the two EMas are touching. This is a good sign that silver MAY change direction here.

However, looking on the longer time frame (daily chart) I can see that price is slightly bellow SMA 85 and EMAs are ready to give a bearish crossing. Please notice that the same pair of EMAs and SMA 85 can be used both on daily and 30 minutes chart. This should not come as a surprise since you already know that many times (but not always) market in general or an individual stock have a "fractal" property, a pattern noticed on a small time frame does repeat on longer time frames.

Looking on ever longer time frame (weekly chart) notice that DMI is still slightly positive so overall the rally started in September 2010 is not over yet but is seriously challenged at this point. If EMA25 is going to cross EMA 50 on daily chart and the weekly DMI is going to turn negative I expect further plunge. However, if EMAs are going to give a bullish crossing on 30 minutes chart or "refrain" from crossing down on the daily chart I expect a nice mini-rally. Either today or next week we are going to have the an answer.

Talk to you later


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