Silver has weakened consistently since September and maintains an overall longer-term bearish trend that has been in place since price failed to reach the 50.00 level back in April 2011. Recent weakness is hitting the precious metals as bets grow that the Fed will start to taper its asset purchases in March and some economists hinting that they may surprise during the December 18th meeting.
Another key signal for commodity weakness is the recent rise on the yield on the 10-year note, which this morning traded around 2.84% and this cannot be making the Fed happy. Rising yields would hurt the economic recovery and possibly force the Fed to become strategically more accommodative.
Price action on the daily chart is highlighting a potential bullish ABCD pattern along with major oversold conditions with our stochastics indicator. The ABCD pattern currently displays ideal symmetry between the A to B leg with the C to D one. If valid, traders may see a rally target $20.49, which is the 38.2% Fibonacci retracement of the C to D leg.
The trade: Buy Silver at $19.29 with a stop loss at $18.69 and a take profit at $20.49. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading