Assessing Silver–Is It Time To Buy Or Wait?

It is often said that there is nothing wrong with waiting for confirmation of a particular direction first and missing out on some initial gains than to guess the direction and take a massive loss because you guessed wrong. That is the approach I am taking with silver at the current time.

I may miss a move in silver… a $3.00 move perhaps… but I am prepared to miss that first move to obtain stronger confirmation because for reasons I outline in the chart below, If silver can break $35.90 (let’s call it $36.00) then I do believe that we could very well see a move that takes silver back into the low 40’s. Money printing (inflation) will have a part in it yes, but there are still strong fundamental headwinds in play that are proving to be a major drag on commodities.

Note the following in the chart below.

• First the massive parabolic move that resulted in a massive correction … (not to toot our own horns here … ok, I am… but we called this move in the mid 20’s);
  
• Then we got the correction and the resulting rebound but something happened during the course of that rebound … Silver was making a head and shoulders top (bearish) while gold was forming its double top. We all know what happened in September.
  
• More recently, I’ve been really stuck on the silver trade for the following reason. If you notice the chart below, we seem to be forming another bearish head and shoulder pattern and the right shoulder of that chart is what is keeping me at bay.
  

Note that I have placed the right Shoulder designation in Green. I am still uncertain as to whether or not the pattern will form or will fail. A break above $36.00 will signal the failure of the pattern and at that point I will jump in strong. However, on the flip-side I will go short heavy if I see any close below the $30.00 neck line. Because we are in that “pattern forming or negating” phase, I would much rather wait on the sidelines and miss the first part of the move both ways than to be caught guessing.

Remember, I am by no means a technician or a stock chart guru and always refer to my disclaimer. This information is meant only to give readers a “second opinion”. The first one should always be your own.