This is perhaps the most important chart for silver investors (weekly silver prices). It reveals that a breakout in silver is extremely possible, and perhaps likely in the near term.
The key to this chart is the $18 support level (refer to the blue line above). The first time $18 was crossed was in early 2008 (refer to the chart above), when silver spiked from $14 to $20. Then it took five months to break below $18 in July 2008. Once it broke below $18, it promptly fell to $10. It was a 50% retracement from $20 to $10. That was the first battle at $18.
From that $10 low in 2008, it began an uptrend. However, $18 got in the way again. It took 8 months to breech, from January 2009 until August 2009. That was the second battle. Now we are battling for $18 again. And guess what? It’s been 8 months since it was breeched in September 2014. The third battle is almost over.
Once silver closes above $18.50, a breakout will likely be in effect. There is some resistance at $20, so that will take a few months to break though, but once we reach $23, it is clear sailing to $27. Once we reach $27, we may never see $18 again. Investors will never have a chance to pick up silver below $20 again.
It is possible that this third battle at $18 could take more time, and the $15.50 low from November may not hold. But the price action in 2015 is indicating that it will hold and that we will get a breakout above $18. I would say that sometime this summer we will see $18 silver. When that happens, the likelihood of a new low diminishes substantially.
This is all about odds and possibilities, but the silver chart is setting up nicely for a breakout this year. If it closes anywhere in the 20s in 2015, then 2016 could see a monster rally. There is very little support from $23 to $27. Basically, it is a clear run to $27 after $18 is breeched. Once we get to $27, it is game on. It will be difficult to push it back down. I suppose it could be pushed back to the low 20s, but I think the teens will be out of reach.
Once we reach $27, there will be another long battle from $27 to $35. This should take a few months. Silver is going to want to retest $35, because there is very little support beyond $35. The three numbers to follow are $18, $27, and $35. That is where the three battles will take place. Once we win all three, then it is off to the races and the sky is the limit. I think $100 silver is a conservative number.
The only thing that can stop silver from winning these battles is a strong economy. If people are confident in the economy, then they won’t purchase economic collapse insurance, which is what silver essentially is. In fact, most people are repulsed by even considering the purchase. People want to feel good about their lives. The last thing they want to think about is collapse insurance. This is why silver is trading today at $17, when it should be trading at $50. No one wants to believe that we are in trouble.
But we are in trouble, and that is why silver is going to win those three battles. Respected investment analysts have all been screaming from the rooftops that we are in big trouble economically. And it’s not just the USA, it seems like every country is having problems. What is happening in Japan and China with their 300% debt to GDP, and the USA and Europe with their runaway debt, is unsustainable and getting more precarious every day. Have you noticed all of the calls to do away with cash recently? If that isn’t an omen of our downfall, then I don’t know what is. Our economies are wobbling. If there was anytime in history to hold precious metals, it is today.
The following post was contributed to Gold Stock Bull by Don Durrett (www.goldsilverdata.com).