By Christopher Aaron
Silver continues to wind and grind its way toward a major multi-year low. The chart pattern is increasingly clear for those with the proper perspective. Unfortunately, over the short-run, silver is doing what it tends to do best: frustrate the majority of investors into abandoning the sector, just at the wrong moment.
As in the other major lows which have occurred over the subsequent decade, many will be caught unprepared for the next wave of the advance when it occurs, due to the human tendency to only follow markets which are moving sharply higher. In reality, the best time to be following and investing in a market is when it is grinding into a support zone, so as to be positioned when the next wave manifests.
This is exactly where the silver market finds itself today.
Silver Retesting 7-Year Base
The most important point to remember about the present silver cycle is that the precious metal is currently retesting a 7-year base breakout which occurred just over one year ago.
The slightly slanted 7-year base can be seen clearly on the long-term chart above (blue). Note the grinding-type of price action which featured many overlapping waves beginning in 2013 when silver fell below $24 per ounce. Lower? higher? lower? higher? and finally lower to the 2020 Coronavirus panic-induced bottom near $11 per ounce. These overlapping waves with little to no net change in price are classic characteristics of a long-term basing pattern in technical analysis.
Following the Coronavirus selloff, as inflation began to become the primary concern in the financial system, silver finally broke out of its 7-year base (red callout), by registering weekly closes above $18.60, the final downtrend resistance zone of the base (turquoise line).
The tremendous wave higher that followed the breakout took the precious metal to near $30 per ounce in August 2020, nearly a tripling the price in a little over five months.
Such an impulsive wave, with clear multi-year new highs, is a tell-tale sign of a new cycle underway.
Retest is a Process
Again, the point that investors need to remember now is that silver is currently retesting its 7-year base breakout. A retest is when a market comes back to a former resistance level, and challenges those buyers who caused the breakout to show up and buy again. In classical technical analysis, the rule is that broken resistance is expected to turn to support.
In this case, the zone near $18.60 is where former resistance is expected to see buyers reemerge on the retest.
The challenge in long-term chart analysis is that in extremely bullish markets, proper retests will not come fully back to their breakout points, before a market will embark upon its next wave higher. In this case, it is possible that the retest of silver?s 7-year base may only come back to $20 or $22. It is thus possible that the retest has already occurred, and that silver is in the process of now rounding upward into the next wave higher.
Again, in very bullish markets, retests will not come all the way back to their former breakout points.
However, in less bullish markets, retests will sometimes come all the way back or even slightly below their breakout points.
We cannot know for certain how far silver will need to come back to finalize its 7-year base retest. However, we can know that from the current price near $22 per ounce, we are much closer to a bottom for the retest process than we were last year when the price hit $30. If risk exists down to $18 - $20? but potential reward exists up to $50 (the former 1980 and 2011 all-time high), then from a risk to reward perspective silver is extremely attractive in the present price region.
The Proper Strategy for Silver Investors
The proper strategy for those who understand the big picture perspective of a long-term retest, yet with the uncertainty of the exact price point which will represent the final low, is to accumulate a portfolio of silver and silver-related investments into the current window. By dollar-cost averaging now and for perhaps the next 6 ? 18 months, silver investors can capture an excellent portfolio of value into the expected low, but without the worry of needing to try to time the exact bottom.
Remember: silver had had fallen by 78% from 2011 to 2020. The price of silver could not fall by 100%, so inherently much of the risk had already been taken out by early 2020.
In mid-2020, silver finally broke higher from its 7-year base in an impulsive inflationary advance. The market is now coming back into the zone of the former base in a classic retest. Former resistance is expected to act as support within the next 6 ? 18 months, and a new bull market should emerge as the world begins to grasp the ramifications of the inflationary policies following the Coronavirus for the last two years.
Silver investors should not be abandoning the sector now, but aggressively accumulating silver-related assets into the retest. Those who do so will be rewarded when the next up-leg of the new cycle begins. Unfortunately, those who think they will be able to time the bottom perfectly will likely be caught without sufficient holdings once the next powerful advance begins.
At www.iGoldAdvisor.com, we are preparing to purchase several silver-related investments amidst any final selling into the coming low. In addition to open market trades, we plan to make highly-leveraged investments via private placements, which offer investors free warrants in silver mining companies in addition to their shares.
The big picture must be remembered with silver at all times, and now more than ever: an extremely healthy base breakout retest is now underway.
Silver continues to wind and grind its way toward a major multi-year low. The chart pattern is increasingly clear for those with the proper perspective. Unfortunately, over the short-run, silver is doing what it tends to do best: frustrate the majority of investors into abandoning the sector, just at the wrong moment.
As in the other major lows which have occurred over the subsequent decade, many will be caught unprepared for the next wave of the advance when it occurs, due to the human tendency to only follow markets which are moving sharply higher. In reality, the best time to be following and investing in a market is when it is grinding into a support zone, so as to be positioned when the next wave manifests.
This is exactly where the silver market finds itself today.
Silver Retesting 7-Year Base
The most important point to remember about the present silver cycle is that the precious metal is currently retesting a 7-year base breakout which occurred just over one year ago.
The slightly slanted 7-year base can be seen clearly on the long-term chart above (blue). Note the grinding-type of price action which featured many overlapping waves beginning in 2013 when silver fell below $24 per ounce. Lower? higher? lower? higher? and finally lower to the 2020 Coronavirus panic-induced bottom near $11 per ounce. These overlapping waves with little to no net change in price are classic characteristics of a long-term basing pattern in technical analysis.
Following the Coronavirus selloff, as inflation began to become the primary concern in the financial system, silver finally broke out of its 7-year base (red callout), by registering weekly closes above $18.60, the final downtrend resistance zone of the base (turquoise line).
The tremendous wave higher that followed the breakout took the precious metal to near $30 per ounce in August 2020, nearly a tripling the price in a little over five months.
Such an impulsive wave, with clear multi-year new highs, is a tell-tale sign of a new cycle underway.
Retest is a Process
Again, the point that investors need to remember now is that silver is currently retesting its 7-year base breakout. A retest is when a market comes back to a former resistance level, and challenges those buyers who caused the breakout to show up and buy again. In classical technical analysis, the rule is that broken resistance is expected to turn to support.
In this case, the zone near $18.60 is where former resistance is expected to see buyers reemerge on the retest.
The challenge in long-term chart analysis is that in extremely bullish markets, proper retests will not come fully back to their breakout points, before a market will embark upon its next wave higher. In this case, it is possible that the retest of silver?s 7-year base may only come back to $20 or $22. It is thus possible that the retest has already occurred, and that silver is in the process of now rounding upward into the next wave higher.
Again, in very bullish markets, retests will not come all the way back to their former breakout points.
However, in less bullish markets, retests will sometimes come all the way back or even slightly below their breakout points.
We cannot know for certain how far silver will need to come back to finalize its 7-year base retest. However, we can know that from the current price near $22 per ounce, we are much closer to a bottom for the retest process than we were last year when the price hit $30. If risk exists down to $18 - $20? but potential reward exists up to $50 (the former 1980 and 2011 all-time high), then from a risk to reward perspective silver is extremely attractive in the present price region.
The Proper Strategy for Silver Investors
The proper strategy for those who understand the big picture perspective of a long-term retest, yet with the uncertainty of the exact price point which will represent the final low, is to accumulate a portfolio of silver and silver-related investments into the current window. By dollar-cost averaging now and for perhaps the next 6 ? 18 months, silver investors can capture an excellent portfolio of value into the expected low, but without the worry of needing to try to time the exact bottom.
Remember: silver had had fallen by 78% from 2011 to 2020. The price of silver could not fall by 100%, so inherently much of the risk had already been taken out by early 2020.
In mid-2020, silver finally broke higher from its 7-year base in an impulsive inflationary advance. The market is now coming back into the zone of the former base in a classic retest. Former resistance is expected to act as support within the next 6 ? 18 months, and a new bull market should emerge as the world begins to grasp the ramifications of the inflationary policies following the Coronavirus for the last two years.
Silver investors should not be abandoning the sector now, but aggressively accumulating silver-related assets into the retest. Those who do so will be rewarded when the next up-leg of the new cycle begins. Unfortunately, those who think they will be able to time the bottom perfectly will likely be caught without sufficient holdings once the next powerful advance begins.
At www.iGoldAdvisor.com, we are preparing to purchase several silver-related investments amidst any final selling into the coming low. In addition to open market trades, we plan to make highly-leveraged investments via private placements, which offer investors free warrants in silver mining companies in addition to their shares.
The big picture must be remembered with silver at all times, and now more than ever: an extremely healthy base breakout retest is now underway.
