Clive Maund - Mon, Jan 29, 2018

Is the Shine Coming Back to Silver?

Technical analyst Clive Maund sees upside in the charts for silver.

Since gold and silver are "joined at the hip," much of what is written about gold and the dollar in the parallel Gold Market update applies equally to silver, so here we will look mainly at the points that need to be made separately for silver.

The first point that we will look at is that silver's giant Head-and-Shoulders bottom pattern is downsloping compared to the flat-topped one forming in gold, as we can see on its latest 8-year chart shown below. This is because silver tends to underperform gold in the late stages of bear markets. One important effect of this is to camouflage the incubating bull market in silver, as investors tend to take one look at its long-term chart and say "Well, that's not much good, is it?—it's still going down." This gives silver—and silver stocks—considerable "snapback" potential once both it and gold break out of their respective base patterns, meaning a sizable rally that for many investors "comes out of the blue." Silver at this point is still spluttering along sideways at a low level marking out the Right Shoulder of its H&S bottom pattern, but as the "neckline" of the base pattern is downsloping, it won't take all that much for it to break out of it. Once it does it will encounter a zone of quite strong resistance in the $26-$28 zone at the underside of the earlier top pattern. Note the big volume buildup as the Right Shoulder has formed, which is bullish, as it is with gold, although in the case of silver, there has not been so much upside volume, which is why its volume indicators have not advanced much—yet.

On silver's latest 6-month chart we can see that it made a plucky but short-lived attempt to break above a line of resistance in the $17.30-$17.50 zone last week. It failed and is now vulnerable to reacting back on a short-lived dollar relief rally, although it shouldn't drop far, probably no lower than $16.80, and any such drop will be viewed as presenting a buying opportunity, especially in the better silver stocks.

The latest COT for silver is considerably better looking than the latest COT for gold, which is rather surprising, and is viewed as an indication that any reaction will be minor, and also supports our contention than when silver does break out of its base pattern, the resulting rally could be sharp.


Click on chart to pop-up a larger, clearer version.

Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.

Disclosure:
1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in the content preparation. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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