Last week we highlighted the importance of the gold/silver ratio for precious metals investors, and how this indicator is our most important model to watch during the new year: (https://bullionexchanges.com/blog/2019/01/07/in-2019-can-the-gold-to-silver-ratio-break-lower/).
Given how important silver is in the denominator of this ratio, let us properly update silver’s technical outlook to see which levels it must overcome during 2019 to embark on a new bull market.
Silver Last Week
For the week, silver finished lower by $0.13 cents or 0.8% to close at $15.66 as of the final trade on the New York COMEX on Friday afternoon. It thus slightly underperformed gold, which finished higher by 0.3% or $4, to close at $1,290.
However, it is not so much the closing price but rather the technical model which has most relevance for silver investors at this juncture.
Resistance to Watch
Silver is now facing a major five-fold of technical resistance. All of these levels are prices upon which certain cohorts of traders will be lining up to initiate sales. For investors in physical bullion, it will be beneficial to monitor these technical levels. So as to better prepare for the volatility ahead during 2019.
We expect that the pending challenge for the precious metal will be the greatest confluence of technical selling pressure since the 2016 peak at $21.25. If not the 2013 peak at $25.00.
Let us discuss the specific levels which silver must now overcome to embark on a new bull market. These levels show on the long-term chart below:
- The former long-term 2003 – 2018 rising trend (magenta) which was broken last August, now comes in at $15.80.
- Horizontal support, which held silver higher on at least a dozen occasions from 2016 through 2018, should now act as resistance between $15.60 – $16.10 (black dashed line).
- The target for silver’s short-term break above $15.00 is $16.00 exactly, measured as equal to the amplitude of the previous September – November consolidation between $14.00 and $15.00 ($1.00) and added onto the breakout point.
- The 38.2% Fibonacci retracement of the entire decline from 2016’s peak at $21.25 down to the recent low just a few cents below $14.00 comes at $16.65 (not shown).
- Silver’s primary declining trend from the 2017 peak comes in at $16.70 (blue line).
The resistance zone is highlighted above on the long-term chart in red. In sum, five separately-derived resistance levels appear within a $0.90 cent range between $15.80 – $16.70. Certain traders will cue sales off of each of these levels over the next several months.
Under such a strong test, the bias must be that silver will fail to overcome the pressure. Lower prices will emerge within the next 1-2 quarters, perhaps to re-test recent lows near $14.00.
However, the beneficial aspect of this type of analysis is that: if, by some unforeseen event, silver is able to prove itself here and clear this major technical hurdle… we will then have a very strong signal that the next leg of the longer-term advance is on our footsteps in 2019.
If it can indeed overcome the above resistance level. Our target for the next 12 months will be in the low-to-mid $20s as an initial zone.
The pressure thus remains ahead for silver over the short run… but a bright future lies beyond.
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.