Silver Price Forecast Per The Rule Of 7

February 12, 2014

"There appears to be no rhyme nor reason to The Rule of Seven, but is often surprisingly accurate in its predictions. It is based on the assumption that the initial leg of a new price trend reflects the potential power of the changing forces of supply and demand sufficiently to serve as a guide to the probable extent of the price move. Put another way, using the Rule of Seven, a measurement of the initial leg of the trend is all the information needed to project one or more objectives in the direction of the new trend.

Numerous tests that I have made over the years have revealed that the formula for measuring upside objectives by the Rule of Seven is slightly different for downside objectives.

In an uptrend the basic formula is: Measure the size of the initial up-leg by subtracting the low price from the high; multiply that figure by seven; then divide the product by four to get the distance from the low to the first (price) objective. Subsequently, divide the product by three for the second objective, and finally by two for the third objective…and lastly divide by one. Note that for each of the four objectives the respective distance figure is added to the initial low.

Using the old numerical Rule of Seven method to (theoretically) forecast how far this silver bull will run, I calculated four price targets, based on the following data:

Initial up-leg: 22 – 4 =18

Low = 4

Silver Price target # 1 = $36 (already reached)

Silver Price target # 2 = $46 (reached in 2011)

Silver Price target # 3 = $67

Silver Price target # 4 = $130

Unfortunately, the Rule of Seven does NOT provide time horizons for achieving these silver price forecasts. 

Please be cautioned, THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY FORM OF SILVER. I am merely sharing my research reading with you. By all means go to a library to read the book source listed below, which provides many other little known TA methods. Who knows, Old TA methods may be like old neckties, if one waits long enough the style comes back to be a WINNER. Nevertheless, in all cases DYODD. 

For those readers who would like some more details about the RULE OF 7, here is the book source:

The symbol for silver ‘AG’ comes from the Latin word ‘agentum’ meaning silver.

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