Technical analysis: Silver to climb after breakout

SINCE this column last looked at silver and advised buying it, it has rallied significantly. We show what to expect next. Silver ($) – Far higher target, but short term overbought. Recommendation: Buy pullbacks ongoing. Trend: Short and medium term up, but overbought. Strategy: Tighten short-term trading stops only. Hold for the medium term and longer. (Daily)

A month ago silver broke its 16-month downtrend by breaking out above line 2, of a large channel with line 1. (We advised buying when it broke out above line 5 in mid-August). There is now a significantly higher target in place.

The daily stochastic oscillator is clearly overbought (but can remain so in a strong trend). The weekly stochastic (not shown) is also overbought, so some pullback is to be expected, but it will be temporary.

The strategy now depends on your time horizon. For shortterm traders, raise a trailing stop to a close below $34 (spot price). Then look to buy or reenter on a pullback, say to $32.30. Medium- and long-term players should hold, and if there is a correction here, add to your position. (I don’t think it will fall much below $32).

The minimum upside target is $46.30 based on the size of the channel projected up.

The short-term trailing stop loss is a close below $34. For medium-term positions and new positions, the stop loss should be a close below $29.50.