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Bruce Powers
Silver Bullion Coin

Today, we look at the larger picture in silver by performing analysis on the monthly chart to see what it might be telling us.

Bullish Long-term Price Pattern

As we watch silver continue to consolidate in the short-term it’s good to keep the price action in perspective relative to the developing long-term pattern. The longer time frame pattern will many times inform price action in the short to intermediate term time frames.

One of the things that stands out right away when looking at a monthly chart is that silver is that it has been within a 6 to 7-month consolidation, where it remains today. Price would need to move out of that range before silver sees an improvement in momentum and it starts trending again. As of last month, the consolidation period takes the form of a bullish flag.

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Monthly Bullish Flag Formation

The flag pattern is supported by the 21-month exponential moving average (ema), which was tested as support in December and it held. Also, you can see on the chart how the monthly open and closing prices have been at or above support of the 55-month ema during the formation of the flag. The trend recognized by the 55-month ema has been turning up slightly, while the more sensitive 21-month ema clearly turned up back in July of last year.

If the long uptrend line holds then a breakout of the flag should occur before price falls below the line. This may not happen, but the relationship can be watched as we move forward in time.

Watch for Breakout of Flag

At this point, a breakout above January’s high of $18.85 will initiate a bullish breakout of the pattern. Of course, a move above the top trend line will provide an earlier signal, although less reliable. We’ll have to watch as price rises to the line before determining what price the line represents.

Long-term Price Targets

A couple long-term price targets for silver are marked on the enclosed chart and are identified by looking at the confluence of Fibonacci levels. The first is at $21.95 to $22.19, followed by $27.09 to $27.48. Since these are long-term targets, if they are eventually reached it could take some time. Moreover, silver first needs to breakout of the flag and keep rising, and then breakout of the double bottom pattern, which doesn’t occur until price moves above $21.15.

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