Silver Briefly Hits $117 In Volatile Session

Just two weeks ago, when silver was at “only” $79.79, I pointed out that a very bullish ascending triangle pattern was forming, indicating a surge to roughly $121 in fairly short order. At the time, even I questioned myself somewhat, but I trusted my methodology and hoped I would be right and not end up with egg on my face.

Sure enough, silver broke out of that pattern and soared nearly 50% in just two weeks, coming very close to the target on an intraday basis today before pulling back in an extremely volatile session. In this update, I’ll show you what happened and what I expect next.

As usual, I prefer to analyze COMEX silver futures, since that’s how the price of silver is largely determined and because trading volume is reported, unlike in the spot silver market. Read my tutorial to learn why watching volume is so important.

As you can see from the chart, silver rallied explosively from the ascending triangle and reached an intraday high of $117.70 today, which is just 2.73% below my original $121 price target. It’s important to remember that these targets are estimates, not exact predictions, but in this case, silver came very close, which clearly validates the methodology.

But in line with the extreme volatility we've seen lately, silver sold off on heavy volume after hitting $117.70, closing virtually unchanged at $103.90. It was a wild trading session, with a mind-blowing intraday range of $16, or about 15%, from the low to the high of the day.

Zooming in on the price action using the 30-minute intraday chart shows more clearly how the trading day played out:

There was no specific reason for silver’s sell-off from its high today, nor does there always need to be one. This is often the nature of strong, volatile moves, as volatility goes in both directions.

Craig Hemke of the TF Metals Report offered a credible theory that silver was deliberately pushed lower ahead of silver futures options expiration, a pattern that has occurred in the past:

Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that today’s silver volatility may be linked to speculators in China, who have been a major force behind the precious metals bull market, reducing their positions ahead of the week-long Lunar New Year holiday:

Eric Balchunas, Senior ETF Analyst at Bloomberg, shared a fascinating chart showing the recent explosion in trading volume for the world’s most popular silver ETF, the iShares Silver Trust (SLV):

So I’m sure many of you are wondering whether silver’s bull market is over now that it has essentially reached my price target. The short answer is: absolutely not!

That said, as I often point out, no bull market moves in a straight line, and I certainly don’t expect the current one in precious metals to either.

The reality is that after a sharp surge like we’ve just seen in silver, a cooling-off or consolidation period should be expected and even welcomed. That does not mean a crash or the start of a bear market, however. In secular bull markets like the one silver is currently in, these pauses typically take the form of mild pullbacks combined with sideways movement to work off overbought conditions.

As you can see, silver is technically quite stretched, with a wide gap between its price and the 200-day moving average, which typically results in a consolidation:

So while my current expectation is for a healthy and benign period of cooling off in silver, I remain adamant that its long-term secular bull market is far from over.

One reason is that the bull market is only two to three years old (depending on how you measure it), and these bull markets have historically lasted at least a decade, as I recently explained. I fully expect silver's current bull market to last at least as long as the previous ones.