Silver certainly got its Bollinger Band shakedown last week. From one extreme to the other. It is unfortunate when people are lured by greed into buying at highs expecting a parabolic run to continue. There are enough guilty parties out there contributing to the hysteria, of course, showering us with promises of $5,000 gold and $200 silver. Perhaps that will all come to fruition, but for now, there are a lot of disillusioned investors who bought into hollow predictions that gold and silver had plenty of rocket fuel behind them, readying to propel the two precious metals to the moon without fear of a pullback.
Whenever there's a take down like this, the people responsible for making these giddy-brained forecasts always have a built-in excuse if things don't pan out: Big Brother Intervention. It's up to you whether or not you wish to buy into such claims. I have my doubts it will get you any further ahead as either an investor or trader, however.
There were other warning signs of a pullback aside from over-enthusiastic news letters, gushing websites, Bollinger Bands bursting at the seams and overbought stochastics.
Copper, for example, has been trending downward since mid-February, and it had been leading silver and gold for some time. The three metals essentially converged in April, just as copper was struggling to stay above its 50 DMA. Since then, copper has fallen all the way to - and slightly through - its 200 DMA, but has been rescued by a trend line. There's an ABC pattern as well, suggesting copper may have found a temporary bottom. Copper's activity in this area might be important where gold and silver are concerned.
Copper ABC Pattern
Copper vs Gold and Silver
Copper Lines
Copper Bollinger Bands
As for silver, it climbed back inside the lower point of the Bollinger Bands. It breached the 61.8 % Fibonacci Retracement, but managed to makes its way back to this psychologically important level.
There may be some more downside; however, Friday's activity was encouraging and the bulls finally started to fight back. A strong bounce in gold yesterday should also help silver's cause.
Silver Bollinger Bands
Silver Fibonnaci's
Gold Bollinger Bands
