The two faces of Silver

How a chartist draws a line can make all the difference in the world between a good call or a bad call, a profit or a loss. The current Silver market is a great example.

Last week I really thought Silver was ready to rock and roll. And it still may be, although the odds are shifting. What I saw last week was a market characterized by three factors.

  1. A 4- week symmetrical triangle bottom. It must be noted that drawing this pattern was only possible because of the spike high on Sept. 27. On a closing price chart this pattern never formed.
  2. A possible 6-month channel, that if violated, would yield a target in the high $50s.
  3. The smallest short position by commercials since at least April 2009.

I took a shot at the long side on Oct. 25 based on these factors. I blew my position last night and am now flat.

 

As is often the case with pure chart trading, the same chart can be subject to alternative interpretations. With the decline on Monday and Tuesday’s early drop, let me present the bearish interpretation, which quite frankly is more consistent with the dominant view I have presented on Silver in this blog since late April.

In silver, it is possible to interpret the rally from the Sept. 26 blow-off low as simply a a rising wedge retest of the late Sept. collapse. If this interpretation is correct the market has a target of 21.00 +/- $1 which should be reached within four to six weeks.

The Gold market never gave me a buy signal based on the charts. The daily Gold chart displays a possible 6-week flag that retested the double top. The target in Gold, if this interpretation is correct, is 1380 to 1395.

This is one other alternative interpretation in the precious metals (actually, only Gold is a precious metal — Silver is a commodity with a shine). Both markets could be far from declaring themselves, meaning that the past 6 weeks will morph into larger and longer patterns.

I know exactly what you Silver bulls are thinking about this post: “Brandt, you are bearish one day, bullish the next and bearish the next. Can you make up your mind?” The answer is a loud, “NO!” I am a chartist. I believe that charts provide set ups with certain reward to risk parameters and trigger points. I do not believe that charts are useful for price forecasting. I am on record with this stance dating back 30 years. When I get a chart screaming a certain message I develop a strong opinion, weakly held. I will hold and state that opinion until the price action tells me something else. Then my scream will carry a different message.

$GC_F, $GLD, $SLV, $SIF

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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