My previous two blogs focused on the support and resistance in metals, and the resulting forward probable trading ranges, based solely on that analysis. In this blog we will follow up on how those projections have turned out. Also we will look at a similar analysis for the current picture of silver.
(if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart chart.)
In the blog post from November 26th, 2010 and January 15th, 2011, we looked at the effect of a weekly compression of the upper S/R lines, and how this would tend to reduce directional price movement. The weekly gold chart below shows that the compression range did persist, and greatly helped to define the trading range that since occurred.
However three weeks ago S/R lines 1 & 2 reset upwards. This serves to end the compression and increase the probability that price will rise to the next resistance level. The time delay of the last three month's trading range has given the upper N band time to begin retracement. The likely N band trajectory will form the next area of resistance for this time frame. The lower N band is rising rapidly providing strong support. This all points to a higher expected trading range in the next month.
In the blog post from January 15th, 2011 I wrote about copper's likely trading range. On the daily chart of copper below, you can see that price has moved up into a new area of compression based resistance. However the N band trajectory is predicting that S/R 1 and 2 will reset upwards in the next eight to ten sessions. With the lower N band turning up this should cause copper's price to rise in the coming two or three weeks.
Now we can add silver to the mix. Silver has gone ballistic in recent months. The daily chart of silver below shows how price has just entered a compression area of resistance. This should provide some degree of price chop and pause.
The daily price action in the next five to ten sessions will be telling, because it will provide more time delay for the upper N band on the weekly chart below to fall further. Based on that N band's trajectory we can plot a more probable trading range for silver.
Let's face up to the situation for what it is though. Silver is undergoing dramatic price volatility and is thus difficult to predict. Identifying some part of an improbable trading area is the first step towards forecasting a probable trading range. The best useful analysis I can see is the declining upper N band on the weekly chart. In one month it should define resistance between 35 and 36. However support is currently far below at 25. We'll stay tuned to see how this one turns out.
What methods would you use to augment this analysis, and identify trading ranges?
Kirk Northington
Northington Trading, LLC
www.metaswing.com
kirk@metaswing.com
Twitter: @kirknorthington
author: Volatility-Based Technical Analysis, John Wiley & Sons