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Thursday, April 25, 2013

A Price Target for Silver

By Rude Awakening

Boston, Apr.25, hot stocks .- “I think I remember your prediction for gold to bottom out at $1,000 to $1,100,” writes a curious reader “Although I understand it’s the big brother of silver and does get most of the attention, do you have a prediction for silver’s bottom?”

Over the past week or so, you’ve bombarded me with questions about silver. Fine. You win. Today, I’m going to break down silver’s chart for you and slap a price target on the poor man’s precious metal.

Let’s get the ugly part out of the way first:

Silver’s going lower.

With me so far? Good...

If you’ve paid attention to my gold predictions over the past couple of weeks, this should come as no surprise. As you’ve already pointed out, silver and gold tend to trade in similar fashion. And if you’ve ever bothered to pull up a longer-term chart, you know that we’re essentially looking at the same breakdown that we saw with gold.

Silver Price

A couple of key features you should note on this chart:

From the far left, the price of silver consolidated and broke out in late summer 2010. Along with gold, silver staged an impressive multi-month rally that culminated in spot prices close to $50 an ounce in spring 2011. That’s your blow-off top.

From this point, silver finds support multiple times in the $27.75 range -- all while posting a bearish series of lower highs. Notice how this support zone lines up perfectly with the area where silver took a break halfway through its monster run-up in early 2011. When this support area was violated, silver (and gold) crashed.

So where will it go from here?

Turning back to the chart, you can see that it is becoming clear that the price of silver is completely retracing the gains from its furious 2010-2011 rally. Support is nowhere to be found -- until you look back to early 2010. That’s where I’m betting silver will finally crash-land. That would be the $17.50- $18 range...

Don’t get lured into back into silver just yet. It’s taking a break right now -- treading water in the $23 range. But I expect additional downside. Silver will eventually give back all of the gains from the final stages of its multi-year rally. It’s only a matter of time...
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