Silver Should Now Work Towards Below $30.00

I was studying the silver charts last night after reviewing a superb analysis by our friends over at Screwtape Files, and while that LONGER term perspective does appear to make sense, I am of the view that the shorter term to intermediate term horizon will see silver trade below $30.00 in short order and perhaps make its way down to test the prior low of $26.15.

Here’s the chart… commentary will follow:

Note that Silver still remains in a significant down-channel since making the May 2011 highs. It has failed on two occasions to break that upper trend line and in the meantime has put in two rising wedge formations that broke down.

More recently though, two bearish pennants (pennants in a down-trending market) were formed with the first one breaking down and then the second one formed. (Circled on the chart above). Silver needed to break above $34.50 to negate the downside break according to my analysis but also needed to remain above $32.50 to negate the bearish potential of this pattern. As we saw in the overnight, and as I predicted last week, any bounce would be a contra-trend bounce and not the start of a new move in the price of silver. With equities looking frothy, there is a move a foot back to the US dollar (for the time being) and this will impact precious metals for sure. In any event, the break of $32.50 should now see the resumption in selling on the even bigger head and shoulder pattern now formed which should see silver’s next support coming in at $29.00. If that doesn’t hold, we could see $25.00 in no time. If the Elliot Wave count of this being a c wave down is proven correct, this move down could be swift.

Note: The pattern can negate with a massive upward thrust in silver that takes it beyond $34.50 but there appears to be a lack of any real upside momentum. Any buying is quickly faced with selling. These shorter term corrections must take place before any real upside momentum can build.

I am continuing to hold my SLV April 25 puts. This information is not intended to be a buy or sell recommendation but is for instructional purposes only.