Silver formed a blow-off top in late April 2011 (marked as “A”). See my blog posts issued at the highs here -- how do you spell bubble? 'SILVER') and here (8 years of global Silver supply changed hands last week). Following the sharp $17.50 break from the April 2011 high, the market rallied back above $44.40, forming a bear wedge (marked “B”). The completion of the 18-month rectangle (marked “C”) in mid April 2013 produced a yet-unmet target of $16.60. I believe this is where we might be headed.
Remarkably Pathetic
The daily price chart now displays a possible 10-month descending triangle. If this labeling is correct, descending triangles most often produce sharp declines. The Silver market has been remarkably pathetic in its inability to rally when Gold, Platinum and especially Palladium show signs of strength. As a trader looking at markets within market groups, it has been my policy to be long the strongest when bullish and short the weakest when bearish. Silver is the weakest of the precious metals (although my contention has always been that Silver is a raw material commodity, first and foremost, and only secondarily a precious metal).
A decisive close below the Dec 2013 and Jan 2014 lows would arguably complete this triangle and establish a measured-move target as low as the mid-$13 range, although I would feel more comfortable with a target of $15.50. When dealing with such a clear chart sell signal, traders always need to be alert for a bear trap. A wash-out of sell stops below $19 and even $18 followed by a sudden upside reversal would be an indication of a terminal blow off.