Silver Completing Textbook Rounded Reversal and Monthly View

Feb 18, 2009: 7:46 PM CST

A reader asked me to comment on the chart of Silver, and it’s quite an impressive chart to behold.  Silver is close to doubling in price from the October 2008 lows to present.  Let’s take a look at the daily chart and also view the monthly structure as well.

Silver Daily:

Silver Daily

Silver is showing us exactly what a textbook “Rounded Reversal” pattern should look like, from the slow shift from sellers to buyers which comes complete with a multi-swing positive momentum divergence.  Use this as a reference as to what the pattern should resemble.

Silver prices have increased roughly 70% from the October inflection point, and one can take advantage of price moves in silver potentially through the SLV Exchange Traded Fund (which shows an identical pattern).

The momentum oscillator is close to reaching a new high, but the price rise from mid-January has been almost consistently up every day in a comfortable, steady fashion.

From a more conservative standpoint, the trend was confirmed officially to “up” in mid-January when price took out the early January price high just after the 20 EMA crossed bullishly above the 50 EMA.  Price is now above all three key daily moving averages, having cleared the 200 this week.

Let’s see how this structure might fit in the larger, monthly chart picture.

Silver Monthly Structure:

Silver monthly

I’ve placed a very simple Elliott Wave count, which shows that we have likely completed the ABC Corrective Phase (after a remarkable run-up from $5 to $20 which sent the price quadrupling in roughly 5 years).  Most likely, we are in early Impulse Wave 1, which means that – long term – silver could have even more upside potential yet to come.

Officially price is above all three key moving averages, and these respective averages are – despite the hideous 2008 plunge – still in the most bullish orientation possible.

Price is probably due for some sort of short-term correction to work off the recent strength, but by the same token, don’t doubt such a strong uptrend.  Keep watching silver (and gold) for additional clues.

Corey Rosenbloom
Afraid to Trade.com

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10 Comments

10 Responses to “Silver Completing Textbook Rounded Reversal and Monthly View”

  1. chartsandcoffee Says:

    You can also trade Platinum via PTM. Also a good looking chart.

  2. RK Says:

    Hi Corey,

    Love your blog. Very informative and educational – especially for novice traders like me. Can you possibly post any of the trade/setups that you used recently ? Basically would like to see the thought process of how you go about looking at a potential set up – (One trade that worked and one were you exited with a quick exit).

    Thanks
    -RK

  3. Corey Rosenbloom Says:

    RK,

    Thank you for reading – sure, but there really hasn’t been anything earth-shattering in the price action today or yesterday. I normally post an intraday summary of the day’s action (you can scan the blog for plenty of examples) but this week just hasn’t given me anything to talk about intraday educationally (flat range despite a big early morning Tuesday move down). I try to keep the focus of the blog on educating and showing ‘ideal’ patterns in the intraday structure rather than bragging or whining about my personal trades but perhaps it will be a good idea to walk readers through one or two actual trades from entry to exit this week.

    Thank you for the post inspiration!

  4. DaveB Says:

    And shame on me for ignoring this entire precious metals rally! The fall selloff was so severe and so totally the opposite of what most expected to happen to pm stocks that I never trusted this rally. I saw plenty of good setups all the way up but never went for them. I need to do more work on honing my ability to ignore the noise/pundits/fear and just listen to what the chart is telling me.

  5. Reggie Perrin Says:

    from 8 to 14 = 50% rally/retracement of the 2008 collapse

  6. Corey Rosenbloom Says:

    Dave,

    I think a lot of people missed this move, or doubted it as it continued.

    Chart analysis can be quite helpful, but in such an environment where the markets are jumpy, it might not be a grand idea to ignore news 100% (as much as many of us would like to) but filter it out accordingly.

  7. Corey Rosenbloom Says:

    Reggie,

    Good point! I should have drawn a Fibonacci grid as well which would have us at that 50% line. Argument for a pause or short-term correction.

  8. JustTryingToHelp Says:

    Corey, I’d have very grave concerns about going long silver right now. Look at a one year daily chart and you will see that the decline unfolded in 5 waves down. The current upward move is undoubtedly corrective according to EW rules and guidelines due to its many overlapping waves. IMO you should be looking for a short entry on silver. And soon.

  9. Corey Rosenbloom Says:

    JTtH,

    Thank you for your comments.

    I tend to agree with you now, the more I’ve looked at the chart. We’ve reached the 50% Fib retracement and do seem to be getting parabolic on the daily, forming an ominous arc.

    I think the overall price will go higher in time, but we’re certainly due a counter-trend (down) move soon (could be a sharp one), perhaps starting Friday or next week. I don’t see that taking us to new lows though.

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