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Silver Triangle-Bound, Potentially Seeking to Extend Bearish Correction

Silver Daily Chart

Silver (daily chart) as of Monday (6/20/2011) has continued to languish near the bottom of a symmetrical triangle consolidation pattern that is also just above a key uptrend support line extending back to the late August 2010 lows. In the event of a breakdown below this triangle and bullish trendline, price action will have confirmed a continuation of the sharp and dramatic bearish correction that occurred after the all-time high of 49.78 was hit in late April. If this breakdown occurs, a larger bearish correction could be seen, prompting price to fall even further to target the 32.00 level once again. With further bearish momentum that breaks down strongly below 32.00, silver could potentially begin making its way down to target further downside support around the 25.00 price region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education