Technical Analysis: Silver Prices Could Soar
Silver prices have been relatively flat for the past few weeks, but don’t let this discourage you. The gray precious metal could soar much higher this year and could also have another stellar year in 2017. Currently, silver prices are up more than 40% and the precious metal is hands down one of the best-performing assets at this time.
You see, one could be bearish on silver prices if the fundamentals were turning in the wrong direction and the charts were screaming “Danger ahead!” As it stands, though, this is not the case. The price action and the most basic fundamentals are saying silver prices are setting up to reward investors big-time. The returns we have seen so far could be just the “teaser trailer” of what’s to come.
For example, the silver supply is in deep trouble. Major producing countries are reporting dismal figures. (Read more about this here: “Silver Prices: This Trade Has 562%+ Possible Upside as Silver Moves Higher.”) Yet silver investment demand is surging. (For more information on demand, read “Silver Prices: 1 ‘Magic’ Number Says Silver Could Spike to $50.00.”) This is the perfect recipe for a big move to the upside. It is, after all, basic economics.
When you look at the charts, there are several bullish developments that shouldn’t be ignored by silver investors whatsoever.
First, look at the long-term silver price chart below and pay close attention to the blue lines and the circled area at the bottom of the chart:
Chart courtesy of www.StockCharts.com
Since 2011, silver prices have developed a chart pattern called a falling wedge. At the very core, a falling wedge is formed when the swings in the prevailing downtrend get smaller.
Notice the downtrend getting narrower over time, too? In technical analysis, this pattern is regarded as a reversal pattern. Once the price moves above the upper trend line, a major bullish move could be in play.
One of the most important factors silver investors must keep a close eye on is volume. If the price moves to the upside and volume doesn’t expand, the pattern could fail.
As it stands, we see silver prices are breaking out of the falling wedge. This is very bullish. As this is happening, we are also seeing volume increase. As a matter of fact, as silver prices broke above the trend line, we saw massive spikes in volume—something not seen since 2013.
Saying the very least, this is very encouraging.
Silver Prices Outlook: Bullish If You Own It
Now, when it comes to technical analysis, if you are looking for a chart pattern, there’s usually target for which you can aim. With a falling wedge, technical analysts usually place their target for the length of the wedge by noting the difference between the beginning of the wedge and the end.
The total price decline in silver prices was roughly $36.00—from nearly $50.00 down to around $14.00. If we assume silver prices make a comeback and move up by $36.00 from their current level, we could see silver above $50.00 an ounce.
Obviously, dear reader, time will tell more. In the meantime, keep a close eye on silver mining companies. If silver bullion is setting up to reward you 100%, mining shares could be setting up to reward you with a return five to eight times higher!