Last week, I explained that I was still expecting one more drop by the metal, which we did see. However, based upon the pattern of the overall recent consolidation, it has opened other options to the larger potential rally in which silver is now engaged.
Also, as I have mentioned in the past, February has traditionally been a strong rallying month for silver, but, clearly, that never guarantees an actual rally occurring. Furthermore, the CME reducing its margin requirements will provide valuable firepower in the next move up in silver, which is still expected to be quite powerful, and will most likely occur in March.
However, I have to modify my support region based upon the current pattern I am seeing. Whereas, in the prior article, I wanted to see the 31.85 region hold as support, and it is still possible that it will, the downside support region has now been extended one dollar lower to the 30.50 region based upon the pattern. Furthermore, it seems as though this correction may continue for another week or so, and potentially bottom between the 24th and 29th of February, assuming that we do not see an immediate explosive break out in the futures over $34 by Tuesday.
As for the upside target regions, I am still expecting that silver will approach and potentially exceed $40 on its next rally, but the manner in which it moves up may make me reconsider if silver is heading to new highs now, or will present us with another short trade at the end of March potentially targeting the 22.50-28.00 region. Stay tuned.
Disclosure: I am long SLV.