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John: Silver (continuous contract) opened at $28.26 today, touched a low of $28.21 and then rose to a high of $29.03 before closing at $28.84 for a gain of 45 cents (1.59%).

Looking at the 6-month daily chart we see that yesterday (Monday), Silver tested the strong support level at $28 which held and it closed at $28.39.  At the open today, below Monday’s close, it appeared as if the support level was to be tested again but Silver rallied for a gain of 45 cents on the day. Based on the previous 6-week trading pattern, this is bullish for it further solidifies the important $28 support level (green dotted line). In addition, this support coincides with the Fibonacci 50% retracement level as shown by the blue Fibonacci set.

Since December 6, Silver has been trading in a horizontal trend channel bounded by $28 support and $31 top resistance. This channel has played an important role in completely unwinding the overbought condition of the RSI that arose in November.   The next Fibonacci target level is shown as $34.60 (this is not a BMR price target as we don’t give price targets but a theoretical Fibonacci level based on technical analysis).

Looking at the indicators:

Recently the RSI has formed a bullish “W” formation and has also bounced off a previous RSI support level (thin horizontal orange line).  Today the RSI is at 48% and pointing up – looks very bullish.

The Slow Stochastics has the %K (black line) at 15% and below the %D (red line) at 24% with both pointing down. Expect the %K to turn up and cross above the %D in the near future to complete the bullish “W” formation. This is very bullish because the “W” is low around the 20% level.

The ADX trend indicator has the +DI (green line) at 19 and below the -DI (red line) at 27 with both being entwined since the beginning of 2011.  This  indicates little or no trend direction and consolidation taking place. The ADX (black line), the trend strength indicator, is starting to flatten out at 20 after declining since the start of 2011. This also indicates a consolidating situation.

Outlook: Expect Silver to climb toward the top of the channel and make an attempt at a breakout to challenge the Fibonacci target of $34.60. The ducks appear to be in order.