Silver Ready For A Squeeze Play?

 | Jul 23, 2015 02:38AM ET

The markets have recently been enthralled with the fall of gold and silver as the metals seek to make lower lows. However, Silver is facing a squeeze play as a small double bottom forms on the 4-hourly chart that keen eyes are watching closely.

The silver breakdown started in May and has been vicious for traders with a bullish bias, as prices are currently down over $3.00 an ounce. However, in comparison to gold, the metal has provided some positive signs of late as a small double bottom and wedge pattern are seemingly forming. There is subsequently potential for a base to form at the $14.790 level that could yield some interesting trading opportunities.

Silver and gold both exhibit very different fundamentals as silver is correlated with industrial demand, and to a lesser extent, the equity markets. Silver is a key component of circuitry and, in particular, is heavily used in smart phone production. Subsequently, the metal retains a strong fundamental case for its industrial demand.

Taking a look at the technical aspects of silver provides an interesting case for a retracement from its current depressed level. The 4-Hourly chart shows that a small double bottom has formed around the $14.60 level. Currently, the lows are becoming higher as a small wedge pattern has appeared from the months low. If this pattern holds, it is probable that a retracement back towards $15.20 will occur.