The Silver Market Appears To Be On the Cusp Of Something BIG

The silver market appears to be on the cusp of something big. After months of consolidation that have been frustrating to many bulls, they now have a near ideal setup – a launching pad for the next directional spike.

The original article has been edited here for length (…) and clarity ([ ])

The gold & silver markets have been stuck in consolidation mode over the past year and a half yet for silver, in particular, that consolidation has formed a clear and potentially powerful pattern.

Silver Price (Chart)

The silver market’s consolidation has formed a symmetrical triangle pattern. Prices are now nearing the apex of that triangle. The pattern cannot hold much longer – it must soon break in one direction or the other and, when it does, the move that follows should be sudden and sharp in one direction or the other. [Indeed,] a bearish breakdown could quickly pull prices back down to the $14/ozt level while a bullish breakout would target $20.50 and potentially much higher beyond that.

The latest Commitment of Traders (COT) report shows silver futures speculators positioning on the bearish side. They are holding net short positions of around 20,000 contracts, a historically large bet on lower silver prices. This lopsided positioning has persisted for the past few weeks in silver. The good news for bulls is that when speculators pile on to one side of the market in a big way, it usually backfires on them. Taking the opposite side of the hedge funds and other speculators when their positioning gets extreme is usually profitable, though not always immediately so. This isn’t a timing tool for day traders…

These massive short positions…all represent future buy orders and, at some point, these short positions need to be covered (bought back). When prices break out above an important resistance levels, that can trigger panic short covering that further exacerbates the intensity of the breakout.

The silver market appears to be on the cusp of something big. After months of consolidation that have been frustrating to many bulls, they now have a near ideal setup – a launching pad for the next directional spike.

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