Support

Like many risky assets, silver has had a nice run since last summer. The commodity nearly doubled in price from August to early January. A tradeable proxy for silver is the ishares Silver Trust ETF (SLV).

Recently, SLV broke its uptrend line and began following thru to the downside.

Technicians may be eyeing the 24-25 level as 'support.' Support reflects a price level that may impede further price declines--at least temporarily. The conceptual argument in this case is that when silver gapped higher last November, it left lots of potential buyers behind. Many of those would-be buyers told themselves that if SLV ever returned to the 24-25 level, then they would not miss the opportunity to get long again.

Essentially, then, support levels identify price levels where potential demand may reside.

Should SLV drop another buck or so from there, then watch to see whether that potential demand doesn't materialize--at least for an opportunistic trade...

no positions