By Glenys Sim
July 22 (Bloomberg) -- Silver may falter as the metal struggles to gain a foothold above its 55-day moving average, Commerzbank AG said, citing trading patterns.
The metal’s recent strength is only “upside corrective” and its rally may extend toward $14.18 and $14.35, Karen Jones, the bank’s head of markets analysis, said in a report yesterday.
“This is the location of the 55-day moving average and the 50 percent retracement of the move down from June,” Jones said, referring to a percentage that’s part of the Fibonacci sequence. “This is expected to cap the topside and provoke failure.”
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break of a level of support indicates a price may move to the next level. A failure indicates a trend may stall. Other key Fibonacci levels include 23.6 percent and 38.2 percent.
Silver for immediate delivery traded little changed at $13.5575 an ounce at 10:05 a.m. Singapore time. The metal has fallen 17 percent from this year’s intra-day peak of $16.245 an ounce reached June 3. It is up 19 percent this year.
Silver continues to rebound from its $12.35-an-ounce 200- day moving average, said Jones. This is in “close proximity” to the $12.33 support, which represents a 50 percent retracement of the October-to-June rally. Failure at $12.35/$12.33 would “trigger another leg lower” to the April 2009 low of $11.79, then $11.40, a level not seen since Jan. 23.
To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net
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