Silver price making retracement; chart shows nice symmetry for rally
Silver price rally in August reverses 8-month fall; proposition for new trend
Silver price is looking very optimistic with very nice symmety on its chart. Before I go there, lets look at its price action in the past year.
- Silver price fell consecutively for 8 months based on new monthly lows since November 2012.
- In July 2013, it moved sideways. On hindsight, this is basis for its August rally but a sideways movement should always be taken as consolidation for a continuation of its 8-month fall.
- August price rally was very strong. Its achievement: erasing May and June losses.
What silver price is doing now
Silver bulls may be disappointed and confused with its current price fall. Is the rally over? So short lived? Is it a reversal or a fluke?
Lets put aside our feelings and consider.
Until price falls below August low thereby erasing gains made last month, the current move is a correction – retracement only.
After such a rally in August, it is natural for short term winners to take profit. With any hint of weakness, sellers take over. Until silver price corrects enough, strong hands wait on the side.
Only if price falls beyond August low will the technical picture change.
Scenarios for Silver price
We should not anticipate price action but the current symmetry leads me to wonder if an inverted head and shoulders chart pattern might show up. This is possible if price can find support at July high (take it as a zone extending to the April low period.) An inverted head and shoulders is a classic bullish reversal chart pattern that shows a low-lower low-higher low sequence. Here is a picture of an inverted head and shoulders pattern that GBPJPY printed previously. Note the nice symmetry.
If price fails August low before end of September, sentiment turns ugly.
If price falls below 18.20, then no reversal. Silver enters new 52-week low from this point on.