Silver Update: One More Pullback

Includes: SLV
by: Avi Gilburt

Last week I was looking for more consolidation in silver but did suggest that we may see a strong break out over the $34 level in the futures, which would indicate that the market was extremely bullish. This is, in fact, what we have seen this past week.

Also, as I have mentioned in the past, February has traditionally been a strong rallying month for silver. 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 and possibly into April.

However, since we have not seen the lower levels that were still potential targets, the market may yet target those levels within one more pullback that I expect before a much larger rally begins to take it over $40.

I am expecting the silver market to top out over the next few days within the $36 region in the futures. The pullback that ensues from this next top will be most instructive to be able to place much more accurate targets for the silver market in the upcoming months, as the larger pattern off the lows will then be clarified. If the pullback is shallow, then market will maintain support over the $33.75 level, and then move strongly over the $40 level quite quickly. However, if the market breaks down below that level in the futures, then we may see a pullback as deep as the prior sited target region within $30-$32 region mentioned in the last update before the expected parabolic rally takes hold.

As for the upside target regions, I am still expecting that silver will 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 towards the 60 region, or will present us with another short trade at the end of March potentially targeting the 22.50-26.00 region.

Disclosure: I am long SLV.