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Technical-Chart Analysts See Silver Falling To Low-$18s Area

By Debbie Carlson of Kitco News
Wednesday November 20, 2013 2:12 PM

(Kitco News) - Silver’s technical-chart patterns suggest the metal could see further losses, with a trip to the low $18-an-ounce area possible, technical-chart analysts say.

That would mean a test of the summer lows, which for the December Comex futures would be $18.215 and about $18.24 for spot silver, which occurred in late June.

Right now silver is holding just above the psychological support area of $20, with the Comex December futures trading at $20.175 as of 1:50 p.m. EST on Wednesday.

But technical analysts said they don’t expect the round number to offer a lot of support for the metal.

“We beat up on that level during the summer,” said Glen Ring, editor of View on Futures, and a long-time technical-chart watcher. “But if you’re bullish, you don’t want prices to go there.”

Both Ring and Andrew Thrasher, chartered market technician and investment analyst at Financial Enhancement Group, said the summer lows are more important technical-chart support areas for silver in the short term, which means silver could have another $2 to fall before finding support.

Ring said last week’s trading pattern by silver suggested the market was pausing, but ultimately it resumed its downward path.

Part of what’s weighing on silver is the U.S. dollar, Ring said. Despite its recent correction, the trend for the dollar is higher, he added.

Commodities as a whole have had a difficult year, Thrasher said. “The whole basket is weak. The Fed (Federal Reserve) action has traders chasing risk in the equity market,” he said.

Thrasher said he’s watching the 100-month moving average and the trendline drawn off the 2003 and 2008 lows as support
“That’s been support so far, but looking at the internals for silver, momentum is still weakening and volume hasn’t looked great. There’s not a lot of bullishness on the shorter-term chart right now,” Thrasher said.

Ring said if silver breaks $20, there is some support right at $19.95, which would be the 75% retracement of the summer rally and could be bulls’ last stand before a trip down to the mid-to-low $18 area, he said.

Zach Oxman, portfolio manager at TrendMax, said in the short term he thinks silver could find support at $19.50 to $19.40 and if it holds, silver might bounce back to $20. That could happen if physical buying steps in.

Yet Thrasher and Ring see silver targeting the summer lows, especially if the U.S. dollar tests the November high, Ring said. The November high for the December U.S. dollar index is at 81.58, with the dollar index trading around 81.387 on Wednesday.

If silver dips to test the summer lows, Thrasher said he wants to see silver’s trading pattern for clues for future behavior.

“I’d start by taking a look at the internals to see if momentum has strengthened at all, and at volume. I’d look to see if buying pressure increased. Traders have a lot of muscle memory when we get to levels like that. We’ll see if we have an increase in selling or if selling has diminished. I wouldn’t just look that this is a previous low. I’d take a step further,” he said.

Ring said under the $18.20 area, there is interim support at $16, with the next big support around $14.55, but a drop that sharp would need to be accompanied by something else, such as a rally in the dollar. He sees the dollar index possibly climbing to 84 to 85.

“That would put a lot of pressure on commodities … in general,” he said.

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By Debbie Carlson dcarlson@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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