Six weeks ago we highlighted the important confluence of resistance that the silver price was challenging (https://bullionexchanges.com/blog/2019/01/14/silver-can-it-break-resistance). Let us update this analysis: has silver proven itself ready to shine?

First the stats: for the week in sum, the silver price rose $0.17 cents or 1.1% to close at $15.91. As of the final trade on the New York COMEX on Friday afternoon.

This was a slight outperformance versus gold, which rose $11 or 0.8% to close at $1,333. The gold to silver ratio thus fell by 0.23 points to 83.75. As discussed in recent articles, the ratio is still above the key 80.0 level. Which we are monitoring closely and which would represent a major breakdown in favor of silver – thus likely signaling the next primary advance in both metals, should it occur. It is not there yet.

 

Silver Long-Term

Let us turn to the long-term perspective for silver, so that we always keep in mind exactly where we are with this market.

The most important point: the silver price is still below its long-term 2003 – 2018 rising trend (magenta color). Which was broken last July. We are now seeing this former trend act as resistance, meaning an area in which sellers are emerging. By definition, we must see this broken trend of support regained. This is in order for silver to embark on an accelerated move higher.

Without recapturing the broken trend, the best we can hope for is a sideways-type consolidation with perhaps a slight upward bias. However, if the silver price can recapture the broken support, it could technically embark on a much more significant up-leg within the near future (i.e. 6 – 12 months). Targets for this scenario are provided below.

 

Silver Short-Term

Turning to the short-term perspective, gold’s cousin is now within $0.75 cents of the key confluence of resistance which would represent a major turning point in our model. This resistance zone now includes:

1)  The broken long-term 2003 – 2018 rising trend (magenta, referenced above), which was violated last July, now comes in at $16.00 even.

2)  Horizontal support, which held silver higher on at least a dozen occasions from 2016 through 2018, should also act as the resistance between $15.60 – $16.10 (black dashed lines).

3)  The target for silver’s short-term break above $15.00 is $16.00 exactly, measured as equal to the amplitude of the previous Q3 – Q4 consolidation ($1.00) added onto the breakout point.

4)  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 (light silver line).

5)  Silver’s primary declining trend from the 2017 peak comes in at $16.60 (blue).

 

Takeaway on Silver

In sum, silver is challenging the strongest confluence of resistance between $15.60 – $16.65 that it has faced since we began publishing research on precious metals in 2015.

A break of the upper $16.65 boundary of this resistance zone on a dual weekly closing basis would represent a major trend reversal higher in our model. A significant surge to at least match the 2016 high of $21.25 would be expected to follow such a trend break within 6 – 12 months.

Anything less will represent failure and continuation of the downtrend in place since 2017. With the potential to target our outstanding calculation of $12.80 (green).

This is an important period for the silver market. The time for the precious metal to show its strength is now.


 

CHRISTOPHER AARON
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.

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