Silver fell by $0.19 cents or 1.3% to close at $14.79 as of the final trade on the New York COMEX on Friday afternoon. Amidst gold’s 0.5% gain, the gold to silver ratio rose by 1.8% to 87.0 ounces of silver required to purchase one ounce of gold by the close of trading.
Silver finds itself within a short-term wedge formation which began at the February peak of $16.20. This can be seen below from the teal-colored lines. A wedge is an attempt at a short-term bottom, as we can see the trend of the buyers coming in at a more shallow slope than the trend of the sellers.
Yet the chart shows silver increasingly choppy as it attempts to break out of this wedge. With each attempt over the past several weeks, sellers have reemerged.
In looking to determine levels upon which silver would demonstrably break its short-term downtrend, we must respect the secondary upper (teal) boundary which has developed. We must consider the limit of the wedge formation to be thus a zone of resistance. The upper boundary of this zone comes in at $14.83 in the spot market. If this level were broken on a daily close, it would indicate at least some attempt at a counter-trend rally is developing.
The challenge is that, on any such rally the metal would encounter resistance initially at $15.00 (black), and then at $15.50 – $15.60, which represents the confluence of additional horizontal resistance (black) and broken recovery channel support (turquoise), representing a trend which began at the November bottom. In sum, the metal has a tough job ahead of it even if it breaks higher from the short-term wedge pattern.
On a failure to rally above this wedge, we must turn to the outstanding lower expectations (chart below).
We have retained a lower target for silver since July 2018, when we observed a breakdown below the $15.70 support level, shown in black. The official target was calculated as $12.80, equal to the amplitude of the 2017 – 2018 consolidation ($2.90) and subtracted from the breakdown point ($15.70). This target remains at large.
What would silver need to do in order to show us that it was going to negate this technically-derived target?
It would need to break higher above the declining primary (blue) trendline which began at the 2017 peak. This level currently comes in at $16.35. It is the level which would signify an important trend change in the market. This level is only roughly $1.50 above the present price. We have seen $1.50 moves in silver in single weeks in the past. However, over the past year, a move to negate this downward sloping trend of sellers has been elusive.
Silver Versus Silver Miners
We regularly check on the silver mining complex in comparison to silver itself. As there should be some relationship between the companies which mine for silver and the price of their primary product. For this comparison, we will use the SIL large-cap silver miners fund.
Note below by the blue band, we see that the miners have declined back to a level that has corresponded with silver bullion in the $14.15 – $14.30 range over the past year. With it still approximately $0.50 cents above that range.
Over the short-term, silver is attempting to bounce out of a wedge formation. Even so, it will face several resistance levels within $1.50 of the current price.
Our intermediate-term target remains lower until negated by a break of the primary downtrend.
The mining complex is also apparently pricing in lower. Investors should be on the lookout for lower prices into mid-summer.
BULLION EXCHANGES MARKET ANALYST
Christopher Aaron has been trading in the commodity and financial markets since the early 2000s. He began his career as an intelligence analyst for the Central Intelligence Agency.
Christopher Aaron specializes in the creation and interpretation of pattern-of-life mapping in Afghanistan and Iraq. His strategy has helped his clients to identify both long-term market cycles and short-term opportunities for profit.
This article is a third party analysis and does not necessarily match the views of Bullion Exchanges. Do not consider Bullion Exchanges as financial advice in any way.