Technical analyst Taki Tsaklanos explains his rationale for predicting the direction of silver prices, which includes an analysis of silver’s chart that indicates a possible false breakout.
We very often get the question from readers how to read charts, and how to determine the future price of an asset or stock. Given the interest of many investors in precious metals, and lots of reactions we received on our future price of gold 2017 article, we explain in this article how we determine the future price of silver. Readers who are not interested in this chart analysis tutorial can consult our silver price forecast 2017 for our expected future silver price in 2017.
Silver chart analysis
We are aware of the stream of thoughts that charts are worthless, especially when it comes to precious metals, because the “metals are manipulated”. While that could be correct, and we tend to believe that price setting is influenced by large futures traders, the viewpoint is not useful. The point is that the only way to look at an asset is to analyze price behavior. Moreover, charts ‘include’ manipulative market behavior.
Charts have many variables including time interval, dimensions, aspect ratios, and many more. It is important to look at several time frames in order to understand short, medium and long term dynamics. In other words, investors should look for short and long term patterns.
Moreover, the cleaner the chart, the simpler the challenge to identify patterns.
With that, we turn to a weekly chart on 5 years. This chart shows a down trend in a clear channel. In July of 2016, silver broke out of this downtrend, a very bullish event. However, soon after, silver moved back towards that channel. If silver continues to fall, we can say the breakout was false.
This chart does not reveal too much additional insights. That is why we have to look at a longer term chart in order to get additional insights.
The iShares Silver Trust ETF (NYSE:SLV) fell $0.17 (-1.05%) to $16.02 per share in Wednesday morning trading. Year-to-date, the largest fund tied to the spot price of silver has gained 21.46%, but is now more than 18% off its yearly highs of $19.71.
This article is brought to you courtesy of Investing Haven.