Is the Silver Slide Over?

Today's Idea

The Silver sell-off may be seen by many traders as excessive, but lingering economic doubts could result in lackluster physical demand for the metal. The violent moves the market has seen in recent days may also cause traders to be a bit more conservative. Technically, the chart hints at a possible reversal, but yesterday's price action is hardly the follow-through buying technicians were looking for. Given the extreme moves in Silver in recent sessions, some traders may want to consider using options or mini futures.. Another alternative for traders could be to trade a long Gold/short Silver strategy.

Fundamentals

Silver futures surged yesterday, as the market rode the coattails of rebounding Gold prices. Many traders are now left questioning whether the markets will continue to move in tandem or if the two metals will diverge. Due to its dual industrial and precious metal nature, Silver can often be a market that is difficult to read, and prices move on the market focus of the day. The case can be made that Silver may lag the Gold market in the coming weeks due to the uncertainty over the global economy. Silver may not see safe haven buying if commodity markets as a whole are mixed. If base metals and energies see significant gains, Silver may see a wave of fresh buying, while prices could fade otherwise.

Technical Notes

Turning to the December Silver chart, we see Monday's price action forming a bullish hammer, suggesting prices may reverse in the near-term. Many traders wish they had seen a large green up-candle yesterday, which the market did not provide. This may plant seeds of doubt among technical traders, and the market may see further consolidation instead of a rebound in prices. Closes above resistance at 33.45 may be needed to spark a fresh wave of buying. On the downside, the 26.75 level can be seen as significant, and closes below this mark could bring with them selling pressure. The RSI indicator is still giving oversold readings, which may be supportive of the market in the near-term.

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