Silver is another market where the volatility indicator is playing a key role in the price action on the daily chart and displaying the classic congestion phase which so frequently follows such a violent move. In this case, it was the candle of the 11th August which was the catalyst with the price of silver falling sharply on high volume and confirming the move as genuine.
Since then the industrial metal has found support in the $25 per ounce area denoted with the blue dashed line of the accumulation and distribution indicator which displays the strength of these levels automatically. Here we have a level that has been tested and held on five occasions and hence confirming the strength of this region with silver recovering to trade at the $27 per ounce area and around the volume point of control denoted with the yellow dashed line. This is the fulcrum of the market at present and tells us price is in agreement with no strong bearish or bullish bias. We can think of it as a see-saw with two equally weighted people. As soon as one gets off and a lighter or heavier person then climbs on, the see-saw will move. It is the same here. Now we are waiting for either strong bullish or bearish sentiment to prevail as the levels above and below continue to build in the $29 to $26 per ounce area.
However, for a true confirmation of direction, we must also wait for the price to clear the volatility candle, in other words, $25 per ounce below and $30 per ounce above which will then give a strong signal to the long term direction. Until then, patience is required.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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