May 29th, 2013
Silver futures may climb toward $25 an ounce after prices rebounded from the lowest level since September 2010, according to technical analysis by Commerzbank AG.
Silver prices slumped last week to test the support area of $19.49 to $20 before rebounding in a bullish reversal, technical analyst Axel Rudolph wrote in a report dated yesterday. That support zone consists of the psychological $20 level, the May 2010 high and the December 2009 peak, he said.
Silver futures for immediate delivery dropped as much as 7 percent to $20.6985 an ounce on May 20 before closing 2.9 percent higher at $22.905. Prices ended last week at $22.398, higher than previous week’s close of $22.25.
The reversal last week was accompanied by positive divergence between the daily price and the relative-strength index, he said. It “ leads us to believe that another up leg should be made in the near future,” Rudolph wrote. This should take silver back above its one-month resistance line at $23.25 and the $24.87 late-April high toward $25, he said.
A bullish reversal is when the price declines below the previous low before closing higher than the prior week. Resistance refers to an area on a chart where sell orders may be gathered, and support is an area where there may be buy orders. The relative-strength index measures the velocity of price changes to identify overbought or oversold conditions and turning points.
Silver slumped 27 percent this year, the biggest loss among the 24 commodities in the Standard & Poor’s GSCI Spot Index, as gold dropped 17 percent on speculation the Federal Reserve may curb U.S. monetary stimulus.
Spot silver fell 0.3 percent to $22.2755 an ounce by 3:30 p.m. in Singapore today. In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
- Phoebe Sedgman in Melbourne at Bloomberg.