In August of last year, I warned of a large potential drop in silver, which many vociferously refused to believe. However, before the correction began, I also provided a downside target of the $26.80 region in the futures for a potential bottom, which was, in fact, .80 within the actual bottom four months later.
In my last article, I stated that, "[i]n my opinion, silver is about to complete its corrective decline and should maintain support within the $26 region in the futures." I also stated that the next move in silver to the upside will be quite strong, and will exceed the $50 region a lot faster than most people believe. Since that article about a month ago, silver has rallied $8 to the $34 region in the futures, or approximately 30%.
Cyclical Effects
As you can see from the chart below, over the last 37 years, the greatest gains for silver have been seen during the month of February.
This supports my projection that silver will most likely be over $40 by the end of February.
Update of Prior Analysis - Forecast for Silver
While I do believe we will potentially see silver and SLV over the $40 level by the end of February, I believe we will see some form of consolidation/pullback in the metal starting within the next few days. Generally, when silver is in a strong uptrend, as it seems to currently be, the pullbacks tend to be rather shallow, and should not be more than a couple of dollars. However, as long as we do not see any large spikes down in silver over the next week, which could potentially invalidate this analysis, then you will want to buy the upcoming consolidation/pullback for an even more powerful move up in silver over the rest of February.
Disclosure: I am long SLV.
