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Silver: At A Key Level Before Next Move Higher

Silver's recent drop left some to question if the 2016 bull market was already over, but analysis indicates the correction is within a much larger bullish trend, setting silver up for the next major rally phase

by Jon Salmon, EVR Bullion Limited (UK)

During the bear market of 2012 - 2015, the trend in the market was lower and lower prices. The end of this trend was a powerful signal that a new bull market was beginning. Investors need to understand that the 30% seen so far this year, followed by the recent correction, is normal, as nothing ever moves in straight lines. The current pull back actually sets markets up for a potentially bigger move higher.

 

See below a textbook example of a 123 Reversal pattern:

Source: FX Traders Edge

 

Now compare this textbook example to a current silver chart [weekly] below:

They look identical.

 

The difference is silver is currently rebounding off of point (3) and has yet to break above (2), yet. The trade potential cannot be clearer from a technical perspective.

 

This observation, as I have suggested in my previous writings, highlights that the recent decline is nothing more than a correction within a larger bullish trend.

 

As for near term expectations, the markets provided us with a drop that I believe is the last phase of this correction, as I have mentioned in my previous article. We may see a lower low before this is done over the next week or so. However, I think investors should be buyers rather than sellers as this point in time.

Moreover, should we see silver jump higher through $18.50, rather than move lower in the coming months then it raises the posibility that a bottom has been made and the next leg in the rally is about to begin. Whilst I cannot rule out a further move lower, current prices in my opinion should be bought.


*This post was published according to the "Contributed Article Terms and Conditions"

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