Silver: Short term bullish momentum reaches long term bullish support line
The short term daily candle chart below shows silver ascending a very-short term bullish support line (point 5 on chart) where the high of the current session near 21.758 coincided on the support line of a long term bullish channel (point 4). Although this support line (point 5) may act as resistance, with silver now trading back around 21.448 (as of publication), the short term steep bullish support line (point 5) may enable an upside breakout (above point 4) with a target of the upper resistance line of the medium term bearish channel (point 3).
If this line (point 5) fails to hold the bullish momentum and/or if resistance is found on the support line of the long term bullish channel (point 4), then a bearish continuation may follow along a line similar in slope to previous short term momentum (point 1) and support may be targeted on a short term bullish trend-line just below (point 2) with additional support further below on the support line of a bearish medium term channel (point 3).
Although the very short term trend looks bullish, the overall medium term and long term trend still appears bearish as was discussed in a previous article in early July 2013.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 21.78 with a Limit to take profit @ 21.99 and a stop-loss @ 21.67 Risk/Reward Summary: Limit risk = +21 points profit / (-11) Stop-loss risk = Gain to Loss ratio = 1.90
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 21.31 with a Limit to take profit @ 21.10 and a stop-loss @ 21.47 Risk/Reward Summary: Limit risk = +21 points profit / (-16) Stop-loss risk = Gain to Loss Ratio = 1.31
Short term chart (daily candles):