Saturday, 12 October 2013

Head and shoulders in silver hits the neckline. 2013-10-13

The Head and Shoulders in silver has hit the necklline. now, will it break down or will it bounce from the neckline, where it has previously found support?

Bob Hoye says the sector is very oversold. I have noticed also that the GDX, GDXJ, HUI and XAU have all made lower lows and have broken the higher highs and higher lows of the recent rally. All bearish action. Gold's head and shoulders is breaking down, especially since Fridays downside action and silver's looks like this:

A breakdown from the neckline, currenly at $21 and a measure move of $25.12-$19.85 = $5.27 (the height of the head and shoulders) would give a target of $15.73 for silver.

I already wrote that the target for the head and shoulders in gold could be about $1180, the same as the 28th June low.

Looking at the silver chart, there have been 4 bounces along the red line and a couple a little above it early on in this rally. The price did bonce on Friday and did not end at the low so it is a slightly hammer shaped candle, though not a convincing hammer candle. We need to see what happens over the next couple of trading days early in this next week to get an idea of whether we have an overslld bounce or whether we are going to get a H&S breakdown to take this bear market to new lows.

It's interesting but gold and silver both have shallo uptrend channels from the 28 June lows that have multiple supports a long the channel floor (like the red line above) if you ignore the domed move in the middle which was a breakout from the channel and a move back into it. That might mean that we might not get head and shoulders breakdowns but just a shallow and gradual uptrend (which accelerated too quickly in August and has not returned to a more 'sensible' uptrend.)


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