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July Silver Needs A Catalyst To Confirm Reversal Bottom

ByThe Pattern, Price & Time Report
AuthorJames Hyerczyk
Published 05/07/2012, 08:09 AM
Updated 05/14/2017, 06:45 AM
SI
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July Silver is trading lower this morning due to the higher U.S. Dollar. However, the market is trading inside of Friday’s range of $30.48 to $29.78. This is indicative of trader indecision.

On the bearish side of the coin, silver continues to straddle a downtrending Gann angle dropping .16 per day at $30.08 today. In addition, July Silver is trading on the weakside of a major retracement zone at $32.05 to $30.74. Finally, late last week the market reaffirmed its downtrend with a break through its last main bottom at $29.99.
Daily-Silver-Chart
Trend traders are correct to be bearish since the market is making lower-tops and lower-bottoms. However, last week the trading action was able to move the new swing top down from $33.36 to $31.47, bringing the silver market closer to its breakout level. Most of all, the market formed a closing price reversal bottom at $29.78. This formation often indicates that the buying is greater than the selling at current price levels. The key is the follow-through rally which will confirm the formation.

Today, traders should watch for a rally through $30.48 to confirm the bottom at $29.78. While this will not be a change in trend, it will indicate that shorts are lightening up their positions and perhaps a few buyers are willing to pay up. Typically, the first target of a closing price reversal bottom is 50% of the last rally. This means that $30.63 will be a key pivot price. In addition, the old Fibonacci retracement level at $30.74 is another level that must be overcome to attract more buying.

So while on one hand July Silver is trading in a downtrend, there is a case building for a potential turnaround. The set-up is there for the start of a strong rally, but the market needs a catalyst to fuel the move.

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