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Downside Targets for Silver

By: Jordan Roy-Byrne, CMT



-- Posted 29 April, 2011 | | Discuss This Article - Comments:

Silver is in a structural bull market and will see significantly higher prices in the coming years. However, now is not the time to be buying. The market has spiked and a retracement is coming. Sentimentrader.comís public opinion as of last week was over 90% bulls. The daily sentiment index as of last week was 96% bulls. A correction is coming. We have two charts to help decipher a potential bottom.

 

Here is our first chart:

 

http://news.silverseek.com/2011/29.04.11/1.png

 

On top we plot Silverís distance from its 200-day MA. Note that following previous spikes, the market always tested its 200-day MA and it didnít take long for it to happen. We also compare the current spike to the spikes in 2004 and 2006. Those spikes retraced a little bit more than 62%. The 62% retracement of this spike is nearly $30.

Here is the second chart:

 

http://news.silverseek.com/2011/29.04.11/2.png

 

We see two areas of strong support. The first is $34-$37 and the second is $30-$31. We also sketch the potential path of the 300-day MA. We think it hits $30 in July. The 200-day MA is likely to hit $32 before the end of July.

 

Last year we noted $32-$33 as a potential strong upside target based on the price action in 1980-1981 and various Fibonacci targets. The 38% retracement of the 2008 low to this top is roughly $34.

 

To conclude, our support points range from $30 to $37 with the strongest confluence at $33-$34.

Throughout 2010 we wrote about the key resistance in Silver at $20-$25. We noted that the breakout would be very big and eventually take Silver to $50. We didnít expect it to happen immediately. Gold reached its now former all time high in 2008. Three years later, Gold is nearly 80% higher (than $850). The point is, a market that makes a new all time high for the first time in decades is a market that moves even faster in the future. If Silver follows the same path as Gold then we could be looking at $90 Silver in 2014. Yet, wouldnít you rather increase your positions in the $30s rather than at $45 or $50?

 

Good Luck!

 

Jordan Roy-Byrne

 

For more analysis and projections on Gold, Silver and the mining shares, consider a free 14-day trial to our service. 


-- Posted 29 April, 2011 | | Discuss This Article - Comments:



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