Silver Poised for Rally to Eight-Month High: Technical Analysis
bloomberg.com
By Halia Pavliva
May 15 (Bloomberg) -- Silver futures likely will rally to the highest level since August on signs of increased investment demand, according to an analysis of historical prices by analysts including John Gross and Ralph Preston.
“July silver futures broke $14 an ounce resistance” on May 7 and again this week and may test $14.61, the 2009 high, said Gross, the president of J-E Gross & Co. in Newport, Rhode Island. “If the market is able to overcome that high, the next objective is $15, followed by $16.”
“To the extent the market can hold $14, I believe it will test the next important high at about $14.70,” Gross said yesterday in an e-mailed comment. He said $14 “was the previous important high going back to mid-March.”
Resistance forms at points where rising prices generate significant selling that stalls rallies, said Preston, of Heritage West Futures Inc. in San Diego. When rallying prices surpass such congestion points, “that can be used to identify momentum as a market musters interest to trade through a level that it previously was unable to,” Preston said.
Aggregate trading in silver futures reached a 2009 high of more than 81,900 contracts on Feb. 24. It has averaged 20,000 this month in New York, while the most-active contract traded in a range of $12 to $14.37 before today.
“The lighter volume was associated with narrower trading ranges as the market was attempting to determine if it could get past $13.50 -- which it did,” Gross said. “Along with the higher price, open interest has risen some 7,000 contracts over the past week or so, suggesting that still-higher prices are on the horizon.”
Bullish May
Silver averaged about $15 an ounce in New York last year, compared with $13.47 in 2007 and $12.74 this year. While still down 35 percent from a 28-year high of $21.44 an ounce in March 2008, the price has climbed 14 percent this month.
“Silver bulls have staged a dramatic May rally and appear poised for further gains,” Preston said.
“Look for stable trade above $13.42 an ounce to consolidate and build momentum for rallies to attack the 2009 high,” Preston said. “The market is on fire and a close above $14.28 an ounce opens the door and paves the way for silver bulls to assault the $14.62 monthly resistance level.”
Should silver futures close below $13.42, that would damage “the technically bullish perspective,” Preston said. “Until then, the bulls are free to roam.”
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.
Last Updated: May 15, 2009 00:00 EDT |
