Silver Forecast: Prices Poised To Rally Into Summer
The price of silver has made a spectacular decline since its high of 2011, but several technical and fundamental conditions now have metals traders wondering whether the decline is over. To that question, we answer with a resounding "yes and no," which really means we believe there will be profitable trades in both directions in coming months. This article presents our current map for finding those trades with an emphasis on opportunities in the near future.
Many of our readers know we had been watching for precious metals to put in a low last autumn with a price target for silver in the range of $11.93 to $14.20. We also were expecting metals to experience a brief panic sell-off near the eventual low, which the market produced on the evening of November 30. At that point, the entire structure down from the 2011 high appeared complete as a three-wave [a]-[b]-[c] corrective move, and we began calculating upward targets for the countermove.
The long-term chart below presents a rough sketch of where we think silver prices will go from here. After a completed three-wave corrective move, we are fairly confident in expecting a substantial rally in the near term. In the larger picture, there is less certainty about whether the downward [a]-[b]-[c] pattern represented all of the correction or merely the first part. We are provisionally expecting another downward phase to begin sometime during the second half of 2015, based on analysis we have done for the U.S. Dollar.
Thus we are first inclined to treat a rally into mid-2015 as a corrective B wave, although we also will monitor any signs that that the rally is more than a simple retracement. If silver prices currently are moving upward in wave B, as we believe, then the eventual C wave would produce a new low in 2016 or later.
The monthly chart below highlights the next area to watch for confirmation of buying pressure. In addition to the way price bounced from our target area, note how it has acknowledged the boundaries and harmonics of the modified Schiff channel in the months since 2012. The next confirming signal of a rally would be a monthly close above the upper boundary of that channel.
If the rally is corrective, then after a breakout it should notice the common Fibonacci retracement levels based on the decline from 2011, with the most prominent ones being at $22.80 and $28.10. On the other hand, if price ignores those levels during its climb, it would strengthen the case that the entire correction from 2011 really is finished. Provisionally, we expect the rally to behave as a retracement.
The weekly chart offers resistance levels at a finer resolution, calculated based on price action since the November low. Last week and this week, silver price has tested our support range of $15.85 to $16.36. If the recent low holds, then preliminary upward targets include $19.18 and $21.00. Although price should recognize the first of those levels, we believe it is likely to test the higher one too, because of its proximity to the major retracement target calculated for the monthly chart.
When the next stage of the silver rally is in place, perhaps in the vicinity of $21 to $23, then we will look for additional clues in the Elliott wave patterns and the cycle positions for both silver and gold to indicate whether the move since November represented the complete correction or just the first part of it.
We strive to make our analysis useful to readers who are trading or investing on a variety of time frames. You can find analysis of a wide set of markets at Trading On The Mark.
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