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There has been no damage to silver’s technical condition. For example, silver is above its 21-day moving average. Also, silver remains well above $25, its last major resistance level. More importantly, the price drop at the end of the week occurred with bullish sentiment taking a nosedive. These conditions bode well for silver’s short-term outlook, as does the following chart.
The above chart will be familiar because it is the one I used on King World News on October 28 to forecast a $30 silver price in less than 18 trading days. Silver closed that day at $23.871. On November 9, only 8 trading days later, it reached $29.342 – nearly hitting my target. The good news is that my reading of the above chart indicates that silver might yet reach $30 within my 18-day target, i.e, November 23.
Note the new pattern silver has formed. It is a pennant, and these have the same features as the flag pattern upon which I based my $30 forecast. Both are continuation patterns within uptrends. They allow for a short-term consolidation, mainly to work-off some bullish sentiment, which accurately describes what happened in silver as this pennant formed over the past few days. A pennant pattern typically ends with an upside breakout.
My expectation therefore, is that silver will break out of this pennant to the upside, and probably early this week. The demand for physical silver remains very strong, and it is the demand for physical silver, and not paper-silver, that ultimately determines the silver price.
Most trading in physical silver takes place in London and Zurich. The weakness on Friday occurred after both of these centers had closed. That means that prices were driven down in the paper market. We have seen these late Friday raids to ‘paint the tape’ many times over the past decade, so this latest one should not be a surprise. But what is indeed a surprise to me is that the silver shorts would try this gambit now when the physical market is so tight. Lower prices will only heighten the demand for physical metal. Thus, I expect the silver price to rebound sharply this week.
James Turk
Article originally published by the Free Gold Money Report.
James Turk is the founder of the Free Gold Money Report and of GoldMoney.com. He is also the co-author of The Coming Collapse of the Dollar (www.dollarcollapse.com).. Copyright © by James Turk. All rights reserved.
Copyright © 2008. All rights reserved.
Edited by James Turk
This material is prepared for general circulation and may not have regard to the particular circumstances or needs of any specific person who reads it. The information contained in this report has been compiled from sources believed to be reliable, but no representations or warranty, express or implied, is made as to its accuracy, completeness or correctness. All opinions and estimates contained in this report reflect the writer's judgement as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility.
