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Silver market update with a look at the COT structure, 07.04.2005

The silver market is at an interesting junction. There are two triangle formations coming closer to a resolution: A major one with support at the $6.70 level and a smaller one with support at the $6.90 level. The resistance of the smaller triangle also forms the neckline for a reverse head and shoulders formation, which if broken, would be bullish for silver. 

(Chart courtesy of StockCharts.com)

COT analysis

The commercial net short position is comparatively low and I believe there is a good chance we are bottoming in the current $7 to $6.90 area within the next week or in the $6.70 area within a few weeks and after that we are heading (significantly) higher.

During 2004 a below 4 commercial long/short level provided good buying opportunities. Non-commercial long positions reaching levels of over 65.000 contracts preceded sell-offs.

The fundamentals for silver have not changed and in the long term there is no other way than up for silver, IMO. The current COT-structure and TA suggest that we have a comparatively low risk entry point for silver investment, even though it is not yet clear if this move to the downside is completely over. Still, as in September, and December, the silver market seems to be more dimes to the downside and dollars to the upside.

Earlier articles about silver:

Sources:

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