Silver Market Update
Originally published June 21st, 2008
The arguments relating to gold apply in large part to silver, so here we will only detail the important differences and readers are referred to the parallel Gold Market update.
Like gold, silver has been marking out a 3-arc Fan Correction following its March peak, and the chief difference between the two is that silver looks even stronger. On the 1-year chart we can see that silver has marked out a more solid looking base line of support between about $16.20 and $16.50 above its rising 200-day moving average and we can also see that it is closer to breaking out above the 3rd fanline of the fan pattern. While there remains some chance of the price breaking below the support level at about $16.20, the strong underlying support should prevent it from dropping much further should this occur.
On the long-term chart we can see that the pattern that has formed in silver since March may be a bullish Pennant. If so then an upside breakout, which would involve a break above the 3rd fanline of the fan correction shown on the 1-year chart, would be expected to result in an immediate strong advance to new highs, and such a breakout would therefore be a buy signal.
In the light of the above analysis the correct tactics going forward are considered to be to continue to accumulate silver, better silver stocks and ETF's on weakness over the short to medium-term. Silver is thought unlikely to drop below its late April lows in the $16 area, although there is an outside chance that it could fall further towards its 300-day moving average in the the $15 area. If the pattern from mid-March is indeed a bull Pennant then we will soon see an upside breakout, with a buy signal being generated by the price breaking out above the 3rd fanline currently at about $17.45 and falling quite steeply.
Special footnote June 21st - we appear to be on the doorstep of a breakout from the Fan pattern and strong advance by gold and silver, with VERY bullish action in many Precious Metals stocks on Friday, where dramatic one-day reversal patterns appeared. We will be looking at some of these stocks on the site early next week.