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

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. 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.

  2. 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?

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

  4. 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!

  5. 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.

  6. 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.

  7. 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……

  8. 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

  9. 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.

  10. 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.