THE SILVER PRICE: Setting Up For A Breakout?

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by Steve St. Angelo, SRSRocco Report:

After gold broke above a critical resistance level, held for the past five years, precious metals’ investors are now wondering, “what’s in store for silver?”  While gold surged from $1,340 to $1,440 in just one week last month, silver only went up a mere $o.70.  Thus, the Gold-Silver ratio increased from 89/1 to 94/1, in the same five-day period.

So, the BIG QUESTION many precious metals investors are asking, “Is silver going to follow gold’s move higher?” And, in several price trends in the past, silver does follow gold higher but also outperforms the yellow metal in the later stage.

To understand the dynamics of the silver price, we must realize it is based upon two aspects of the market:

  1. Technical Analysis
  2. Fundamentals

While many in the precious metals community discount or don’t believe in technical analysis (I was guilty of this for years), the majority of traders, investors, hedge funds and institutions most certainly do.  So, if we ignore these technical levels or formations, then we are also blind to how price discovery is being made in the market… yes, even with market intervention.

Now, I am not saying that the current price discovery of silver at $15.25, is based on sound fundamentals if we compare its real value as a store of wealth to all the DEBT, DERIVATIVES, and JUNK ASSETS held in the world, but rather, how it is being priced by the leading DRIVERS in the market… which are traders, investors, hedge funds and institutions.

To better understand how silver is being currently traded, you must know what these leading PRICE DRIVERS are looking at.  Furthermore, many precious metals investors say that they don’t care about the short-term price movement or technical analysis, but when the silver price happens to fall to a low (or is underperforming gold or the market), then there is no shortage of BELLY-ACHING, and COMPLAINING by the very same people who supposedly ignore this information.

So, instead of watching Kitco for daily price actions, hoping and praying for the silver price to finally start moving significantly higher, if we look at the technical analysis, it gives us some important clues.  Again, I still believe the value of gold and silver will be some of the best assets to own when the over-leveraged financial system and economy crash, but if we pay attention to the technicals, they do indeed provide some hints, as they did when gold broke out above $1,360 in a big way.

For example, gold’s price BREAKOUT above $1,360 occurred in a technical formation called, an ASCENDING TRIANGLE.  Here is my chart showing how gold’s price shot above that $1,360 level:

According to technical analysis, a breakout above the Ascending Triangle Top Line is very bullish. Thus, traders, investors, hedge funds, and institutions use this information as a motivation to take confident positions in gold. Now, what are the silver price technicals saying??

Well, if we look at the 40-year monthly chart for silver, its price has been trading in a SYMMETRICAL TRIANGLE formation:

The blue dashed lines show this Symmetrical Triangle formation.  Furthermore, you will notice that when silver finally broke above the KEY $14 Resistance Level in 2007-2008, it shot up to $21 rather quickly. That $14 Resistance Level remained since 1983, but recently has acted as a MAJOR SUPPORT LEVEL. Now, if we take a look at a close up of this Symmetrical Triangle formation, you will see how tightly silver is trading in it:

There is no coincidence that silver is trading in-between this symmetrical triangle.  However, a symmetrical triangle formation suggests a breakout will occur, but it doesn’t indicate whether that will be UP or DOWN.  Thus, market drivers are keeping a CLOSE EYE on the silver price to see which way it will break out of this triangle formation.

I will be explaining this in much more detail in an upcoming video.  Yes, I stated in the past that I would have already made a video, but I have been putting together the charts and will likely publish a new Youtube video in 10-14 days.  Please stay tuned.

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