miroslava.micunkova's picture

Is there a silver lining for a tarnished Silver?

Silver remains primarily bearish, with the price action having been contained within bearish channels for several years. A major bearish distribution pattern which took a shape of a horizontal triangle, developed throughout 2013-2014. Break-down below the 18.263-18.650 base in November last year signalled a completion, prompting losses to a 5 year low at 14.536 on 28 November.

Switching to a daily view, it becomes evident that the fresh 14.536 low constitutes a “Head” of a 3 month head and shoulders bullish base. A decisive break above the 17.780-17.302 neck-line on 16 January signalled a completion from where the rally accelerated steeply higher (currently at 4-month highs). Also worth noting is that the reversal appeared almost at or very near an uptrend line which goes back to 2004-2005. 

                                                                                                                                                                                                                                                                                             

                                                                                                                                     

With the price action locked in several bear channels, we presume the latest rally to be of a "corrective" nature with a medium term upside potential. Our nearest target is seen at 20.025 (100% projection of 14.536-17.302 from 15.550). We will stay cautious around the 21.571-23.062 (July 2014 – October 2013 peaks) area, seeking a lower top for a renewed weakness. Shall these levels give way; recovery may stretch towards 25.999-26.166.  (50% retrace of 37.463-14.536 decline/-June 2012 low).