Last end of week analysis for Silver expected a consolidation to begin. Sideways movement exactly fits this expectation.
Summary: A classic downwards breakout from a very long held consolidation still looks like it has occurred.
The trend is down. Bounces and consolidations may be used as opportunities to join the trend.
Classic analysis strongly supports the triangle Elliott wave count. Expect a consolidation here to last about 5 to 8 weeks, and then to be followed by a continuation of a downwards trend.
Always trade with stops, and invest only 1-5% of equity on any one trade.
Last monthly charts can be viewed here.
New updates to this analysis are in bold.
ELLIOTT WAVE COUNTS
WEEKLY CHART – TRIANGLE
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This first wave count has good support from classic technical analysis, so it will be favoured. This wave count looks highly likely.
The first wave count expects that the bear market, which began from the April 2011 high, is incomplete.
Cycle wave a is seen as a five wave impulse for this main wave count. There are multiple corrective structures possible still for cycle wave b.
This first weekly chart sees cycle wave b as a now possibly complete regular contracting triangle.
Primary wave E of the triangle may have ended with an overshoot of the A-C trend line.
So far, within the new downwards trend, minor wave 3 may now be over with a selling climax. This is typical behaviour of commodities.
Minor wave 4 may now unfold sideways. Minor wave 4 may not move into minor wave 1 price territory above 16.046.
Draw an Elliott channel about downwards movement as shown. Copy it over to the daily chart. Minor wave 4 may find resistance about the upper edge, if it gets that high.
DAILY CHART – TRIANGLE
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Intermediate wave (3) may only subdivide as an impulse. Within intermediate wave (3), minor waves 1, and now 3 may now be complete.
Minor wave 2 was a very deep 0.96 zigzag lasting 32 days (6 weeks). Given the guideline of alternation, minor wave 4 may be expected to most likely be a shallow sideways flat, triangle or combination. The 0.382 Fibonacci ratio would be a reasonable target.
Minor wave 4 may last anywhere from 3 to 13 weeks to show reasonable proportion. However, Silver does not always exhibit good proportion.
If minor wave 4 unfolds as an expanded flat or running triangle, then within it there may be a new low below 14.322. A new low does not mean that minor wave 4 is over.
WEEKLY CHART – COMBINATION
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Cycle wave b may still be completing as a double combination: zigzag – X – flat. The second structure, a flat correction for primary wave Y, may be underway.
Within a flat correction, intermediate wave (B) has now met and passed the minimum 0.9 length of intermediate wave (A) at 15.938.
The purpose of combinations is to take up time and move price sideways. To achieve this purpose the second structure in the double normally ends about the same level as the first.
Intermediate wave (B) may now be over. Intermediate wave (C) may now begin as a large five wave motive structure higher. A target is calculated for intermediate wave (C) that expects it to end reasonably close to the 21.062, so that primary wave Y ends about the same level as primary wave W.
DAILY CHART – COMBINATION
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Within the zigzag of minor wave Y, minute wave c may now be a complete five wave structure.
A new high above 16.046 would invalidate the first triangle wave count and offer some confidence in this combination wave count. At that stage, the downwards breakout may be considered false and a new upwards wave may be underway. This wave count does not have good support from classic technical analysis.
A second wave correction within the new upwards trend may not move beyond the start of its first wave below 14.322.
WEEKLY CHART – BULL WAVE COUNT
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This alternate wave count looks at the possibility that the bear market may be over for Silver and a new bull market may have begun.
Cycle wave II may be a complete double zigzag. Cycle wave II would be very deep at 0.90 of cycle wave I. This is typical behaviour for the first second wave correction within a new trend for commodities.
If it continues any further, then cycle wave II may not move beyond the start of cycle wave I below 13.569.
DAILY CHART – BULL WAVE COUNT
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A five wave impulse for intermediate wave (C) may be complete for this wave count.
This wave count does not have support from classic technical analysis. It is judged to have a very low probability.
A second wave correction within the new upwards trend may not move beyond the start of its first wave below 14.322.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Silver has seen a classic downwards breakout from the shaded support zone, which then provided resistance for a small back test. It is possible that another back test may come.
The strongest signal that ADX can give is when it rises from low numbers (below 15) and from below both directional lines. Once it reaches 15 and continues to rise, then a trend in the very early stages is indicated. This week that is now indicated with ADX above 15.
Now two long lower wicks and RSI oversold at the low suggest a small bounce or consolidation may unfold to relieve extreme conditions, before downwards movement continues.
A target from the breakout of the symmetrical triangle is about 12.08.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The target calculated from pennant pattern was 14.18. It looks like it was not quite reached; price fell 0.13 short. The trend following the pennant now looks to be concluded.
Look now for a consolidation or bounce to backtest resistance at prior support, which is about 15.70. If this happens and price gets up that high, then look out for a sharp reversal and the new downwards trend to continue in earnest.
This is one of the simplest trade set ups: look for a long consolidation (the longer the better) with clearly identified support and resistance, then look for a breakout and back test, then enter in the direction of the breakout.
If Silver behaves like this for us in the next few weeks, it may offer a very good high probability trade entry point for a long term trade that may possibly be able to run for a year.
Published @ 05:48 a.m. EST on 27th August, 2018.