DOWNSIDE TARGETS FOR SILVER

By Jordan Roy-Byrne, CMT

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.com’s 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:

On top we plot Silver’s distance from its 200-day MA. Note that following previous spikes, the market always tested its 200-day MA and it didn’t 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:

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 didn’t 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, wouldn’t you rather increase your positions in the $30s rather than at $45 or $50? For more analysis and projections on Gold, Silver and the mining shares, consider a free 14-day trial to our service.

Good Luck!

Jordan Roy-Byrne

Jordan@TheDailyGold.com

-------------------------------------------------------------------------------------------------------------------

Got a comment or question about this post? Feel free to use the Ask Cullen section or leave a comment in the forum.

Guest

This story is authored by a guest and its content is not necessarily endorsed by Pragmatic Capitalism nor are its views representative of other authors on this site.

More Posts

Comments

  1. There will be no $30 Ag, with or with Mr Fibonacci…

    I would be all in at the $39 oz, since I can not remember the last 20% retracement…

  2. As discussed in one of the interminable other threads here on silver, there are other stocks as parabolic as silver bullion. So why pick on it? I’d rather own silver than (say) Netflix. Sure, absolutely, silver will correct and likely correct hard. But this is voodoo stuff: we ^know^ silver will correct, so let’s now “discover” the technical reasons why and prove that we have some control over an unfathomable market. Anyone with a long term position in silver will welcome the shorting, but this is tiresome nonsense.

  3. I would say that if JPMorgan, HSBC and the rest of the boys and the government hadn`t messed around with the silver price all these years the type of correction
    you advocate is plausable.Since we are talking about the crimminal Comex price
    I really don`t think it means anything anymore. Physical ownership is all that matters. So go and spout your technicals about the paper price which is meaningless. And yes of course everyone would want to buy at thirty dollars again.
    The question is how much real silver will be available after the elites
    get theirs. People are waking up and whatever happens the jig is up.
    Wise up people . Just put your bids in all the way down and take delivery if
    you are so inclined. Maybe you get your silver or maybe you don`t.

    You can alays get that 80 percent cash settlement that seems t be going on.
    The physical market will tell the true story of price discovery in silver.

  4. I am a subscriber – still, I think your calls for drops in the last few months due to chart actions and high sentiment might dissuade you from continuing to follow charts that are obviously not mapped to the uncharted territory we find ourselves in. Then again, uncharted is uncharted and I don’t have a short term compass either. Long term, I don’t see how PM bulls can be wrong.

  5. I was lucky enough to take delivery of 20kg of pure shiney stuff at $18 dollars an ounce taking a long position. This is good advice for spread betters out there though, go long after the correction adding trades as the price moves every $5 moving your stop loss up behind and locking in all that lovely profit. Happy days, bring it on!!

  6. How much is silver worth when you are comparing it to worthless paper money? When I was 14 you could buy gas at $.15 to $.20. per gallon. Therefore, this 1926 Silver Dollar I am holding in my hand right now, will buy more gas today than it did when I was 14. But there is only so much gold and silver and when the run on the dollar gets to main street, it’s going to get wild! Sure, it can break at any time, but after 40 years of trading silver if there is anything I’ve learned, it’s that the trend is your friend and I NEVER pic tops! But I also, almost always, give back huge profits before I get out… but I have a plan and a stop, placed absolutely every day!!!

  7. Reversion to the mean regarding the Gold Silver Ratio is what is happening now and this has a very long way to go. Who are these 97% bullish silver players when silver and gold make up less than 1% of all financial investments? Appears to me to be a very small percentage of players in the precious metal market vs. the amount of money on the side-lines voting NO to silver. ‘Agenda Statistic’ to me. Look at the CRIMEX, J.P. Morgue, HSBC, SLV and the silver paper game manipulation that has distorted the silver value for years. It’s catch-up time now reflecting the manipulated distortions of the past.

    Central Banks have sold off any silver they ever had, the US alone ounce had 10 Billion ounces. The CRIMEX is running out of the physical stuff, and paper silver is everywhere. Own the physical and ride the wave, keep the paper and hit the shredder! Driving using analysis from the rear view mirror usually will cause a crash. We are at a point like no other in history. Last time silver corrected the Fed raised interest rates, national debt was only 33% of GDP and the economy was working. None of this is the case now or is a possible solution to the Debt Monster with the extensive accounting fraud, obfuscation, deceit, lies, misinformation, etc., etc. Remember, Enron went from $ 80 to $ 0 in one day when economic truths finally prevailed. Couple this with too many Republicans & Democrats and not enough Americans, and you have total dysfunctional government that has the ability to solve absolutely nothing. Let’s start paying the Govnmnt for performance and giving each the choice of paying for their failures or respectfully resigning. This should properly clean the Washington House quickly.

  8. what is missing here is that the article presents itself like these are normal times and that silver and people will react like these are normal times, that paper money is desirabe and the smart ones who hold and buy physical will sell their pile when the techs or what ever dictates them to sell. Sell? into worthless colored paper? COME on now.These are not normal times, hell is on its way and there is no viable absolutely dependable money of value except metals.Some corrections will come of course but the silver market is through acting in the future as it has in the past, When the fundamentals and future potentials are considered in this metal the price hasnt even started yet.

  9. The only people who write such nonsense are either delusional or tools of the FED/bullion banksters. There is a significant supply problem with silver at the COMEX and at the various national mints. The Asians are buying every dip. Sure, there will be corrections, but no more than 10% until, at least, silver reaches its past high (inflation adjusted) of $100+. It’s all about the precipitous decline of the USD. If the FED actually decides to help the US economy rather than incrementally destroying it, then all PMs would be in trouble. But that aint gonna happen.

  10. What I see is silver currently building level of support for the future in the high 40’s, taking a break from its recent rally. Correction is indeed in order but certainly not as low as this article predicts simply because the fundamentals are still there (supply disruption, devaluation of the dollar, no raise in interest rates coming, etc).
    Meanwhile gold is taking the lead.
    I wouldn’t short silver for too long Cullen.

  11. We keep hearing about how silver is trying to break out past its previous $50 high from the 1980’s. But what I don’t seem to hear is that adjusted for inflation, that previous 1980 high is $139.84/oz. Also, let’s not forget the historical 15-16:1 ratio of gold to silver. Since we’re still over 30:1, it would seem that silver would have to double to reach its rightful place relative to gold.

  12. I agree with a previous poster – hell is on its way here, and what is one supposed to do – cash in for increasingly worthless dollars? Just wait until (when, not if) the U.S. loses its reserve currency status. Its astonishing how FEW Americans have a clue what that means, nor how frightful our economy really is, and how the dollar will continue to drop as it is, and the inevitable jump in prices that has only just begun. Wait until it dawns on the masses how serious this situation truly is. Just FYI, several bases around the country (I’m with the military) have been conducting exercises during 2010, wherein the gate is closed during the day (no access in or out), and armed soldiers posted all around the perimeter. The purpose of this exercise? “Civilian Riot Control” Comments anyone?

  13. all I see is a bunch of crooks earnig all this earnings from oil, and no one does anything about it..

    wait and see what happens when the riots come to the big city’s…time to go back to barter times, and start paying with Gold,Silver,and the new GOLD…”COPPER”

    I would consider to buy al oyu can of this copper rounds & bars that you see out there..no one is talking about it , but in the last 3 years have you seen whats goin on with COPPER.?

    its more affordable than the other metals at this time..

    but it will also make a big gain in price as time goes on..

    China will back there currency to Copper in the near future, and Japan is goin to need mllions of tons to rebuild..

    and have you seen BARRICK GOLD, just bought the largest COPPER mine on earth….

    GET THE PICTURE.??

    BUY COPPER…..NOW….

  14. Again the “historical charts”. What B.S. Voodoo. Has he a clue as to what is going on outside his office?

  15. Wow, quite a few negative comments here.

    I for one appreciate you posting your forecast and reasoning.

    Thanks.

  16. as long as ben bernanke is allowed to print FRN’s……SILVER will rise to the moon…. what we are witnessing here is a repeat of the Weimar Republic & Zimbabwe,,,, but on steroids…. Welcome to the furture…HYPERINFLATION…

  17. This is not the Tech bubble of the 2000. This is not the housing market bubble of 2007.This is Silver,Adjusted for inflation, Silver should be trading over 100 Now!Central Banks no have Silver,JP Morgan is just starting to their HUGE short.Silver Mania is here to stay, dont let anyone tell you different!!

  18. I am checking silver tonite in the Asian Markets. It´s down more than 7%. Is it just a dip or the beginning of a greater fall?

  19. when we shake off the weak buyers I will be in again big time. for now hold …cant lose this way. may not make as much trying to catch a drop but thats ok with me its the future that counts not the manipulated movements here now.

  20. HI Oh silver and away ! The haves and the have nots. If you got it, you be cool, you don’t you a fool. CYA in silver its bullet(economy) proof.

  21. The way I see it is much like other comments: Over night silver went down by 10% within a few minutes. If that is not manipulation I don’t know what is !!! So the fundamentals are still intact and after the shorts manipulations of the bullion banks et al are done with their dirty deeds WITHOUT any interference from the sleeping watchdog CFTC silver will resume its upward movement as it should with devaluating world currencies, especially the US $ and debt that can NEVER be re-paid all over the globe along with gold and other commodities. And yes inflation will accelerate too. Soon it will become obvious that there is a severe shortage of silver metal all over and there will eventually be a quite for paper silver and a much higher valuation for silver metal (the REAL thing). Time will tell, I am quite entertained by the charades which have been playing out for many many years. Ag & Au still have a lot of catch up to do to reach their deserved valuation, but much higher than presently quoted. Governments / Reserve Banks will continue to manipulate commodities and stocks to maintain the totally corrupt system for a s long as possible. The true market forces will in the end prevail, causing the collapse of the fiat system leading in to a NEW world currency based on precious metals and other commodities likely also with components of existing major world currencies being part of the NEW “basket”. Meanwhile the population in the US and elsewhere will no longer be silent and docile letting the elite 1% that own approx 45% of all wealth in the US dismantle the remaining social safety net and jobs of a vanishing middle class. There are at least 300 M weapons of various description in US households. There is the internet to co-ordinate attacks anywhere in the US at any time likely directed against government institutions and banks. I am just sitting at home having a beer or two or three and watching the tragedy unfold.

  22. wow can i speak to you 1 on 1 please? everything your saying is matching completely with what i’ve concluded without being in the stock market (i just started investing a few months ago). i’m 21 and trying to get my family to see the big picture but they’re hard to get through to. that’s not why i wanted to speak to you, but it’s because i want someone to talk to who KNOWS what’s going on and get your opinion and bounce some ideas off you. since you’re one of the few on the same level as i, i would like to get another knowledgeable person’s perspective on this.

  23. Looking at the charts, I see a correction is coming for these reasons. 1. when a market is overbought, traders who bought sell and lock-in profit. 2. They will come back to buy on the next dip.3. QE2 will ends June 30th and as supply of USD will slow down from the recent pouring, the $ will rebound and $ quoted commodities will dip in prices. 4. In view of an uncertain QE3, traders opt out with profit rather than strain themselves holding on the horse reins for dizzy profit. 5. Much maligned and scapegoated,frayed Bernanke without QE3 can only reduce rate say by another 10 to 15 basis points if ‘he’ still want to increase employment as well as business but since this will be at least a month away, it is safer to lock-in profit.
    In the short term those who have huge profit can withstand 10 to 20% dip
    If silver continue to soar without immediate correction, the next correction will be severe in number even though they may be the same in percentage.

  24. I am buying up ALL the silver I can afford. When the dollar crashes, the banks
    will close and the silver coins will be the only thing left to barter with. Get some seeds, grow a garden, lay in a years stores of canned and freezedried foods, etc. Get ready for the impending “Financial Suicide” that is coming!!

  25. Like I commented to Weiss technical comments when we dipped from 30 to 26, there is a time and a place for technical analysis and I love to stare at charts and connect lines and dots but perhaps now is not the time for that when the Middle East is still on fire and the entire Western World is still drunk on debt. I’m a buyer in the morning again in this picture perfect correction of the leader of the pack Silver at $38-$39. You guys all think like I do. We got a long way to go to catch up with Bernanke and JP Morgan Manipulanly. If you need to buy conservatively for mom’s trust, buy gold on it’s march to $2500. GO FISH

  26. Time to give credit where credit is due. The writer was right on the money. The PM junkies who can never sell never make any money.

  27. I’m new to this and trying to learn. What does “MA” stand for? Some sort of average, but can someone explain it a little?

  28. Jordan thanks for the good call,
    the other recent comments make me laugh all the way to the bank.
    Doc

  29. For all you nay-sayers out there, believe the stats, believe the article. I am currently looking at the ask price of silver at $34.90. Right where he said it should be. Scoreboard!

  30. MA is moving average. The most common is 50 day moving average and 200 day moving average. Which would be the average price for the last 50 or 200 days. But it can be any number of days.

  31. Silver is already down to $34. Don’t fight it play the downside with
    silver short ….ZSL.

    The things to remember here are two: Reversion to the means eventually takes place. And whenever anything goes parabolic that graph is not sustainable and always ends badly. Last but not least the gredy usually lose.

  32. 250. AN OUNCE BY 2014….AFTER DOLLAR COLLASPES IN 2013 OR SOONER….16-TRILLION DOLLAR OVER HEADS……INFLATION……COUNTRIES WITHOUT BAILOUT MONEY………..INTEREST BUILDING HIGH AS THE EMPIRE STATE BUILDING………RICH BANNING THE POOR FROM OWNING SILVER THRU PRICE MANIPULATIONS………BUY COPPER NOW THE NEW GOLD……

  33. No one that invest ever takes the downside serious until long after it happens and are the ones that typically catch the proverbial “falling knife” (Load up all you want at $39 and be sorry). So all the nay-sayers that refuse to accept the downside risk to the correction will pay 10-15% more than they should have to thinking, and wrongly so, that they can predict the bottom. First off, all the hype about supply/demand is a load of crap to start with. There is no proof of increased demand for silver except from the standpoint of speculation/speculators. On Monday, May 9, 2011, we will see another round of massive sell-offs as the COMEX margin requirement is raised to 21,6000 per contract (up from 11,500 just two weeks ago). One comment said that they had never seen more than a 20% correction so a 30% correction is out of the question. As of this writing, 30% became history yesterday as silver hit a bottom of $33.03 per ounce. As I look into my crystal ball, let me be the first to call 40% or possibly 50% down the week of May 9–May 14! Can’t happen? Hide and watch!

    The Boss

  34. Invester psychology is what is driving this selloff. It always does. The increase in margin requirements, the Soros selloff, and the stronger dollar all took place AFTER the decline began. Perhaps those 3 reasons the media is giving for the silver crash is HELPING push silver in the direction it is going but the selloff began prior to May 3-5. It was already going down. Its got a long ways to go before investor psychology changes back to about 80% bears. Then it will be time to get back in. It was 96% bulls 2 weeks ago. Cash is now King.

  35. How long before prices will be in ounces of gold or silver. I wish I had all my silver holding in pre 1965 dimes, quarters and halfs.