Last month I shared with you “Three Options To Go” for silver price, namely “Optimistic”, “Pessimistic” and the sideways option called “Extended consolidation” on one chart. Below are your bets for each option.
Most of you chose the “Optimistic” option where silver should continue to the upside after completing the correction. It’s a rare case when the minority was right as the “Pessimistic” scenario played out the next week after the post. The metal’s price dropped into the abyss at $11.64, reaching the 11-year low in the price area of distant January 2009. I think this move surprised not only me, although I said that it could reach $11 area, but even those who clicked the right answer as it was so quick as price sank within a few weeks from $16.66 for 30%!!!
Silver just can’t stop surprising us as it suddenly changes from latency mode to explosion mode and back, again and again.
The interesting thing happened next as price made a sharp V-turn into the $15 area after that insane drop. This could change the game not only for silver but also for gold, so be careful. Let’s see the updated weekly chart below.
Although we saw a sharp drop in the silver price, it didn’t change the global map, which was posted almost three years ago in July of 2017. We are still in that old range that started back in December 2015 with the first move up (blue AB segment).
Two things changed since then. The first one is the structure of BC junction; it became more complicated as it consists of two big legs highlighted with a red zigzag, which in turn also has two smaller legs. The second change is the angle – we usually consider the consolidation to emerge within a flat range where the extremes of the left side coincide with the terminal points on the right side. This time the C point was established at a much lower level than the corresponding A point as the price pierced the range to the downside. The slope of the range now turned to the downside and targets for the CD segment may vary now.
I put the set of two possible targets for the second move up. The classic D1 point is located at the distance of the AB segment ($7.48) added to the C point ($11.64) at the $19.12. The price now is right in the middle of its way up to this target.
The next D2 target is located at the level of the B point at $21.13. This approach is simple as I consider that the market just wouldn’t stop until it tags the former top. If we apply the 1.272x ratio to the distance of the AB segment and add it to the C point, we will get the same level. This raises the chances of that target area.
Imagine if silver, the weaker of two top metals, moves higher to the upside, what will happen to the gold price? Please share your opinion below.
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.