Silver Market Update
Originally published November 8th, 2006
Silver has broken out of its large triangular consolidation to commence a new uptrend that should take it comfortably to new highs. The breakout is very obvious on weekly charts, which were included in the THIS IS IT article at the weekend. On the 1-year daily chart we can see this clear breakout and how the triangular consolidation, which, as is customary, brought the price back to the vicinity of the 200-day moving average, has completely unwound the overbought condition that had earlier existed. With the MACD indicator having risen up through the zero line, we are now in position for the advance to really get underway. It is worth noting here that although silver has broken out of the triangle, there is considerable resistance in this general area, so progress may at first be hesitant and punctuated by reactions, such as that occurring today. The minimum target for the advance is the $18 - $19 area.
Silver is viewed as being stronger than gold. This is because its triangle is more upwardly skewed, and because its 50-day moving average did not drop back below its 200-day, as was the case with gold - a sign that silver is stronger.
In the unlikely event that the pattern aborts and silver breaks down, the point at which a general sell signal would be generated would be a break below the apex or nose of the triangle, i.e. a break below $11.30 - $11.50.