Silver Bells

As always I get lots of questions regarding precious metals so I thought I would give a quick update on Silver. As you can see in the weekly chart below, silver bottomed at the end of last year and since then to the delight of the bulls has created a series of higher highs and higher lows. To confirm a bottom you want to see the formation of a typical bottoming pattern and silver did not disappoint as it formed what I would consider an ideal inverse head and shoulders. This provided what I needed to conform an intermediate bottom was likely put in. The upside target for that pattern is the red horizontal lined labeled “formidable resistance”. Once it makes it there I expect to see a choppy pull-back which would create the right shoulder of a much bigger head and shoulders pattern.  If this were to occur it would all but seal the coffin of any remaining silver bears and provide a “back the truck up” or “full position” type portfolio opportunity.

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This is by no means an endorsement to go out and buy silver right now.  If you missed the train leaving the station based over the past 3-4 months, the extent and speed of the run-up has been overdone and the risk/reward I feel provides a poor entry point right now. Oversold divergent high conditions on the short term charts raises a caution flag for me and until those conditions have had a chance to unwind I will be content with my existing positions. Anyone who missed the boat or wants to add to their position would do well to wait for the next higher low to be made.