Silver still buy on dips as far as double bottom remains intact

Silver once again closed in negative territory on Thursday showing significant level of weakness. The metal is expected to find a strong support around $19.60 – $19.65 zone, 23% fib level before resuming the upward movement that may last up to $20.83, where at least three resistance levels may be noted, making this region a triple confluence as highlighted in the following chart. 

$20.83 is 50% fib level, 100 DMA as well as 200 DMA are also sitting in around the same level, enhancing the importance of this resistance zone. Thus based on these support and resistance levels the white metal may move in a manner as shown in the following chart;

This typical movement is needed because the market has to print a Higher Low (HL) before going for Higher High (HH) as indicated in the above daily chart.

Similarly if we look at the weekly chart it is also very bullish for bullion as we can note a double bottom targeting $25 resistance, have a look;

The neckline sits around $25 / ounce that would be a big hurdle for bulls. A break and close above the neckline will accelerate the bullish momentum targeting $30.

It is pertinent that the expenses incurred in the mining of Silver were standing at $21.39 in the third quarter of 2013. Thus, the cost of production is higher than the ongoing price of Silver which means miners are operating at net loss. If the price continuous to remain below the cost of mining; the minors would ultimately shut down the mining of Silver and then decrease in supply will cause bullish momentum in price.  So in short term a rise up to $25 will not be very much unusual; however the long term bias is still negative for bullion due to faster than expected recovery in developed economies.

So it is concluded that as far as double bottom remains intact, buying is a good option with a long term target of $25 / ounce. 

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