Silver May Be Close to a Major Breakout

• Silver has been Range-Bound - But is That About to End?
• Silver Shares Starting to Perk Up
• Silver Bottoming Against Gold?

Silver has been Range-Bound - But is That About to End?

Gold has been in a strong bull market recently, which has eclipsed the performance of the gray metal. However, that may be about to change. For example, Chart 1 shows that the Silver ETF (SLV) has been in a trading range for the last seven years. The last couple of months have seen it rise above the green resistance trendline. However, that break has not cleared the line by much and has been unable to seriously surpass its three 2019 month-end highs. It's certainly poised to do so, since the price is above its rising 12-month MA and is experiencing a positive long-term KST. A more decisive break above current levels would suggest a minimum ultimate upside objective in the region of $24.

Chart 2 features silver in a daily format. The price, unlike the monthly chart, has yet to experience even an anemic breakout. That's also true for the Special K, which is explained here. This indicator is very close to that 8-year resistance trendline as well as its red signal line. It's possible that the price is in the terminal phase of forming an inverse head-and-shoulders pattern.

This is more clearly shown in Chart 3, where a daily close that can hold above $17.50 would result in a solid breakout. That same chart also points up the fact that the short-term KST is in corrective mode, thereby suggesting that any breakout could be delayed until the indicator has had a chance to re-group.

Silver's relative action against the S&P is also looking potentially bullish. Already, the RS line in Chart 4 has violated its 2013-2020 dashed down trendline, requiring just a break above the green resistance trendline for a strong signal that the price of the gray metal is likely to outperform the market. Encouragement in this direction is being given by the long- and intermediate KSTs; both are in a bullish mode. Their short-term counterpart is also positive, but has started to keel over, again hinting that any breakout could be delayed.

Silver Shares Starting to Perk Up

Silver shares and the price of the metal often move in tandem, just like gold and gold shares. In that respect, the Global X Silver Miners ETF, the SIL, recently broke out from a base, thereby offering a sign that the metal itself will soon follow suit. In the meantime, Chart 5 shows that the SIL is also in a corrective mode, again suggesting that the price will test that extended green breakout trendline prior to any breakout.

Chart 6 offers further encouragement for both the shares and the metal, as it flags a double trendline violation for the relative action of the SIL against the SPX. Note how the long-term KST for both the SIL itself (Chart 5) and the RS line are both in a positive mode.

Silver Bottoming against Gold?

For 9 years, gold has been out-performing silver, as witnessed by Chart 7. That trend remains in force as the ratio is below both its 2011-2020 down trendline and 12-month MA. The long-term KST of that relationship is also declining. Until that green trendline is violated with a month-end close above .15, I am assuming that gold will outperform.

However, if silver does break to the upside, the odds of a bull market and a mega reversal in its fortunes vis-a-vis gold will be greatly enhanced.

Good luck and good charting,

Martin J. Pring

The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Groupof Walnut Creek or its affiliates.