Will Silver's Upside Price Action Continue?

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 |  Includes: SLV
by: Kevin Wilbur

In late July, I presented "Today's EchoVector Pivot Point Chart And Analysis: Silver" which reviewed silver's annual price chart from an EchoVector Price Analysis Perspective, and highlighted very interesting annual price symmetries that were occurring in silver's price pattern and discussed possible near-term trading implications of these occurrences. I focused on the SLV ETF chart as my proxy for silver metals market price action.

On August 9th, I presented a second article titled "Is Silver Setting UP for significant Upside Price Action This Month?" updating silver's price movements within this symmetry, and alerting the market to a potentially powerful imminent breakout to the upside should this symmetry continue, as it appeared to be doing. As it turns out this alert proved very timely. Silver broke out of the forecasted trade box I presented as a key in that analysis, and has gained over 10% since.

The question today is, will silver's upside price action continue in the near term? Or should investors and traders take profits now and prepare instead for the price of silver to reverse and resume its longer-term downward direction that started back in May of 2011?

FUNDAMENTALS FAVORING CONTINUED UPSIDE PRICE ACTION

Many of the favorable fundamentals for silver's continuing price strength that existed earlier this month still remain very much in effect. Some appear even stronger. They include,

1. The demand for silver in its use in industrial purposes is only growing.

2. Overall silver demand overseas, particularly in Southwest Asia, is reaching record levels. Demand for local currencies there are weakening.

3. Silver coin demand in North America is continuing, and is stronger than ever on certain measures.

4. Since last week's breakout to the upside, options activity in silver remains bullish.

5. There exists indications on the supply side that growth reductions in silver in the near-term may increase.

6. Forces inducing the central bank's generally loose monetary policy in the United States, a high unemployment level in particular, still appear very much unresolved.

7. FOMC Minutes released this week indicate that Fed Tapering could begin sooner than some expected.

8. Middle East unrest, particularly regarding Egypt, remains in the news. Further trouble could affect the precious metals market significantly.

9. Trading in silver futures for September remains bullish.

Will these fundamentals be enough in themselves for buying interest to continue and for prices to advance from current levels further, particularly regarding silver's newly elevated prices?

My answer is silver may very well yet have one more strong price leg and extension upward before achieving what I would consider seasonal price fulfillment consistent within its last two years, even within a general price downtrend. This additional recognition coupled with silver's currently favorable fundamentals should be enough to propel silver from current price levels to even higher prices before present seasonal strength wanes. An EchoVector Price Analysis Perspective as presented on the following charts will help me clearly illustrate this perspective and price outlook.

UPDATING OUR TECHNICAL PERSPECTIVE AND NEW SUPPORT

(Right click on image of chart to open image in new tab. Left click on the image opened in the new tab to further zoom EchoVector Analysis chart image illustrations and highlights.)

SLV ETF 1-Year Daily OHLC EchoVector Price Analysis Perspective

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(Click to enlarge)

In the above chart we can see clearly how silver broke out of the this season's green highlighted time-price trade box that corresponds to last year's similar green time-price trade box. We also see that the symmetry that emerged in the key active annual echovector (highlighted in red and red-spaced) running to this year's current price low on Thursday June 27 from its corresponding echo-back-date low one year earlier on Thursday June 28TH is amazingly, even after our recent price gains, still very much in effect. In fact, today's opening price in the SLV places us in perfect annual echovector symmetry with its Thursday echo-back-date last year.

Notice also how a second significant and full leg of extension last year began at the end of August and continued on up into the week before Septembers option expiration, accounting for another 13% in price extension. This annual echovector price analysis perspective supports the argument for potentially more upside room this year.

SLV ETF 2-Year Weekly OHLC EchoVector Price Analysis Perspective

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(Click to enlarge)

The above chart presents a 2-year weekly (congressional cycle) echovector perspective of the SLV. Notice that the 2-year echovector (highlighted in yellow and yellow-spaced) slope momentum projected from the echo-back-date in 2011 to our key June 27TH price low is nearly equal to the annual echovector's slope momentum also illustrated in the above chart (highlighted in red), which indicates amazing coordination and symmetry and significant slope and momentum subsumption.

More significantly, noticing the three yellow-spaced projected coordinate forecast echovectors, all three of these coordinate echovectors also allow for upside price levels to occur before corresponding echovector related season price highs are reached by way of continuing price symmetry. This bi-annual echovector price analysis perspective would also seem to support an argument for more upside room to come.

I would like to point out that in this 2-year congressional cycle echovector perspective the seasonal weekly closing top occurred 9 weeks after the preceding June's bottom. Whereas, in the annual cycle echovector perspective the seasonal weekly closing top occurred 11 weeks after the preceding June bottom. And in both years the beginnings of a significant price problem that lasted into each year's end started 12 weeks after the June bottoms, the end of 2011 actually being worse than the end of 2012. Investor's and swing trader's considering price action into year's end may want to remain aware of this history.

Last week's significant price up-move in silver encouraged silver bulls. And looking at today's update and additional perspectives, silver's recent upside price move may have further to go, even within the overall downtrend of the last two years. I believe silver bulls have remaining price room and good reason to continue in their cheer.

Thanks for reading. And good luck in your silver investing and trading!

Disclosure: I am long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. I may initiate additional complimenting short-term swing trading positions in SLV and NUGT over this week and next.