Silver Synopsis

Metals Momentum

The long term fundamentals remain the same for the precious metals, including a long term downtrend in the value of the US Dollar, global economic uncertainty and high oil prices to name a few of many. The purpose of this article however is to break down the markets trading patterns and provide more in depth technical analysis based on chart patterns. Lets take a look at the weekly chart on silver.

Silver has been trading in a range between $30 -$35 an ounce for the past 8 weeks or so after it’s last sell off. Over the last 2 weeks it has tested near the $35 mark but failed multiple times to settle above it resulting in selling pressure, including a little over $3 drop between Wednesday and Thursday.

After a 176.33% increase ($17.92 - $49.52) over the course of 8 months, it became necessary for this market to correct and/or consolidate to digest it’s gains before this long term uptrend could continue. Looking at the first correction the 1^st week of May, Silver dropped from it’s highs all the way down to $35.28 close in a week. It does not matter if it’s precious metals, a commodity, currency, or any other trading market. When you have that much of a sell off in that short of a period of time, it usually isn’t finished in a single wave. It took until the 3^rd week of September to kick in but there was a clear 2^nd wave of selling which puts us into our current range of $30 - $35 an ounce.

After 2 major sell offs, the bias is for this market to break it’s range to the downside and have 1 more wave of selling. There has been failure to break above resistance in both gold and silver followed by selling pressure towards the lower end of the trading range. The increase in volume and open interest in the last week implies a increased opening of positions short. Unless you’re working with nominal trading costs and have the time available to trade the volatility, I would recommend waiting for this market to tip it’s hand and break outside of this range before taking a position.

For bulls, the longer it consolidates and trades in this range the better. This will give the market time to develop further support and strength at these levels. Wait for a confirmed breakout out of this range above $35 before purchasing with stops under $34. For bears, wait for confirmed breakout below $30 support before shorting with stops above $31. Remember, just because a market trades outside of a range does not necessarily confirm a breakout. Best of Luck

Adam Laigo
Semper Pacific Wealth Strategies
MetalsMomentum@gmail.com
Twitter: @PrcsMtlsGuy