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A Bullish Breakout for Silver Prices more Probable than Rally Reversal

A Bullish Breakout for Silver Prices more Probable than Rally Reversal

A Bullish Breakout for Silver Prices more Probable than Rally Reversal

COT Silver Futures: Large Speculators Vs Commercials

COT Silver Futures: Large Speculators Vs Commercials

Silver Non-Commercial Positions:

Zachary Storella: Large speculators and traders continued to boost their bullish net positions in the silver futures markets last week for a third consecutive week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.

The non-commercial futures contracts of Comex silver futures, traded by large speculators and hedge funds, totaled a net position of 105,515 contracts in the data reported through April 11th. This was a weekly gain of 4,133 contracts from the previous week which had a total of 101,382 net contracts.

The latest data brings the net position to the most bullish speculative level on record and marks the second straight week over the +100,000 net contract level. Silver speculative positions have grown by +26,403 net contracts in just the past three weeks.

Silver Commercial Positions:

The commercial traders position, categorized by the CFTC as hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -114,414 contracts last week. This is a weekly change of -2,068 contracts from the total net of -112,346 contracts reported the previous week.

Silver Prices On Brink Of A Bullish Breakout

– Taki Tsaklanos: Silver prices are as close as can be to a major breakout point. Silver could start a tactical bull market once it goes higher from here, and remains above $19 for 3 consecutive weeks.

However, readers should not confuse a major breakout with a secular breakout. A major breakout indicates that a tactical bull market is starting. A secular breakout suggests a multi-year bull market is starting. That is a big difference.

The chart below shows the weekly chart on 5 years. The breakout point is indicated with the red circle.

Note that a secular bull market can only be spotted on a +10 year chart.

The price of silver successfully tested support in January, only to find strong resistance at $19 in March. That is when we became bearish and saw silver going back to $15 or lower. Slightly later, we observed that March 2017 would be a decisive month for the price of silver. Indeed, silver went higher in March and April, a more bullish development than we expected.

Interestingly, silver prices look stronger than gold at this point.

The secular breakout will occur between $20 and $22. Silver prices still have some resistance to overcome, but, admittedly, the grey metal looks quite constructive at this point.

Silver bulls want to see a strong breakout at $19 with at least 3 consecutive weeks of trading above $19. After that, it will probably move quickly to the $21 area where it will find the ultimate resistance.

Note that seasonality is not in favor of gold and silver. May and June are typically the weakest months of the year for precious metals. We still cannot believe that silver will jump right into a major secular bull market in the coming months, but the odds of a new bull market in 2018 are definitely increasingly strongly. We will follow silver prices very closely this year.

Could Seasonality Put An End To Recent Rally in Silver Prices?

 – Taki Tsaklanos: As discussed above, the focus was on a potential tactical breakout in silver prices, leading to a short to medium term bull market.

Exceptionally, we will also look at seasonality in silver prices. Although we do not consider seasonality a primary indicator, but rather a secondary indicator, we believe this is an interesting month for reasons outlined below.

Silver bear market continues until it breaks out

As said before, silver is still in a bear market. The falling channel indicated in purple on the chart below makes that point.

Interestingly, silver is right now exactly in an area in-between a falling channel (purple) and a rising channel (green dotted lines). The intersect of both the bearish trend and the bullish trend has, so far, delivered great fireworks.

Silver price seasonality effect about to kick in?

Seasonality in silver prices could play an important role in the weeks to come. Why? Because on an annual basis silver tends to peak during the month of April. In May and June, silver prices tend to go sharply lower, only to recover in July, and continue its downtrend and stabilize throughout the second half of the year. That is based on the seasonality chart of silver over the last 3 decades, courtesy of our good friend Dimitri Speck from silver seasonal charts.

As said, this is an average behavior over 3 decades, so it could well be that 2017 will be an exceptional year. Nobody knows.

The point we are trying to make is this: when combining the seasonality chart of silver prices with the chart pattern in silver’s long term chart, it becomes very interesting. If silver is peaking for the year, then it would be right at major resistance, and would indicate that weakness will continue in silver prices, exactly in line with our silver price forecast for 2017. If things will turn out differently, our forecast for silver prices could be invalidated.

The coming weeks will be extremely interesting and also important for the silver market.

silver price seasonality chart


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