July Silver has tripped a theoretical sell signal at 32.110 tied to a D target at 26.405. I doubt it will be that bad, but we should still be prepared for a fall to the midpoint Hidden Pivot, 30.210. We'll make that our minimum downside objective for the near term while planning to bottom-fish there with entry risk under tight control. Because of the way the pattern is constructed, with a somewhat unconventional 'A' and a 'p' Hidden Pivot in the middle of nowhere, a dip to p would provide an exceptional opportunity to bottom-fish. This will obtain unless the futures reverse and pop above C=34.015.
The pattern shown, with a big-picture rally target at 35.445, has kept us in close harmony with the trend, but it never promised much satisfaction. Pullbacks haven't been sufficiently robust to trigger any 'mechanical' buys, and a short from d is unappealing because the target coincides with some prior peaks that are certain to attract a crowd. That doesn't mean the pattern is untradable, but it takes work. Mainly, it's a matter of hunkering down on the lesser charts to derive entry triggers from them. The daily chart yielded up a fat-looking one at 32.565, but the turn from 15 cents above it suggests it may have had a fan club.
The reverse pattern shown, with a 35.425 rally target, is as gnarly as they come, but May Silver's forceful move through p=31.485 justified stretching for the highest target possible. Recall that in even in lousy patterns, price action at p is still usually a reliable indicator of trend strength. Please note that using the more obvious 'a' low at 29.405 yields a 'd' target at 33.635, so be alert to a possible stall or even a shortt-term top there.
The May contract got a strong push last week to the 'secondary' Hidden Pivot (p2) of a pattern with the potential to deliver more upside over the near term to d=33.635. The initial penetration of p=30.590 was hesitant, but once the futures got past the resistance they never looked back. Assuming silver plays hard-to-get, be ready to buy a pullback to p=30.590 'mechanically'. Your bid at that price would take a stop-loss at 29.575, so a 'camouflage' trigger of lesser degree is suggested. An easy and decisive move through d would portend more upside to 36,769, or even 39.844.
Talk about overdone! I could have used a small a-b- segment to make trading the pending bounce less risky, but because the move higher is likely to exhaust the levels of the larger pattern, including its 35.205 target, I've featured the bigger picture. The futures could still work their way lower before turning around, but a voodoo number at 28.260 is the only spot that looks interesting for purposes of bottom-fishing. Otherwise, a 'trigger' rally to the green line should be regarded as a reliable signal of a reversal, even if it is too belated to get us in near the bottom. _______ UPDATE (Apr 7, 9:28 a.m. EDT): Based on an actual low at 27.545, the trade triggered at x=29.068 and produced a quick, relatively painless profit so far of $30,440 (!) on four contracts at p=30.590. Any contracts still held should use a 33,635 target. You can augment the position with a 'mechanical' bid at 29.068, stop 27.540. _______ UPDATE (Apr 9, 9:45 a.m. EDT): The May contract has stalled at the 30.590 midpoint Hidden Pivot associated with the 33.635 target furnished above. With gold soaring, the stall is unlikely to last. A pullback to x, especially if it comes from the sweet spot between p and p2, would generate a strong 'mechanical' buy.
Covering the remaining distance to the 37.305 target looks like it'll be a piece of cake. The pattern has yet to give a false signal, and any trade attempted with x, p or p2 as a reference point would have been profitable. The last juicy buying opportunity occurred on the pullback to the green line (x=31.380), about as 'textbook as mechanical trades get. Your trading bias should be bullish until 37.305 is hit, but be prepared for a stall there and a pullback, probably tradable.
Comex Silver hasn't exactly shredded the midpoint resistance of the long-term pattern shown in the monthly composite chart. However, it has frolicked and danced there, suggesting that although bulls are in no great hurry to take the futures to as high as $53, they are determined to get there eventually. The target may not seem spectacular, and there are undoubtedly silver bulls hoping for a doubling of 2011's $50 top. That could still happen, but probably not before a lengthy and deep pullback from 53.06. First, let's allow bulls to turn the midpoint resistance into support with a patient consolidation above it. Use 36.605, or 37.305 if any higher, as short-term rally targets. Both should evince a tradable pullback.
Silver and gold have not quite gone their separate ways, but the latter's chart looks much more bullish. May Silver came close to triggering a 'mechanical' short last week when it rallied to just shy of the green line (x=33.534; the stop-loss would be at 34.57). Regardless of whether it gets there, the burden of proof will be on bulls to sustain altitude. Returning to the secondary Hidden Pivot (p2=32.481) would almost surely grease the skids down to d=30.455. _____ UPDATE (Mar 12, 4:53 p.m.): Silver has taken a big leap this week, but let's hold the bubbly until such time as it pushes above 34.085. That's equal to an external peak recorded on Feb 20 whose breach would generate a fresh impulse leg of daily-chart degree. In the meantime, assuming today's 33.815 high is not exceeded first, you could buy a pullback to 33.230 with stop-loss as tight as six cents. _______ UPDATE (Mar 14, 7:49 a.m. EDT): A Hidden Pivot at 35.565 is the next logical rally target in my sequence, although a bigger picture yields 36.605 as a possibility. If I stretch all the way back to the 2008 low, I could see 42.705, or even 53.06. But no higher. These numbers will not be accurate to the penny because my coordinates come from 'blended' composite charts.
May Silver's cinder-block fall through p = 32.508, a midpoint Hidden Pivot support shown in the chart, leaves no doubt that further slippage to at least d = 30.455 awaits. Expect a tradable bounce from that number or very close to it, but don't bet the farm that the rally will achieve new highs above mid-February's 34.560 peak, let alone above October's at 35.800. I've published a corresponding target for April Gold, so we're likely to have a verdict soon on whether the long-term bull market in bullion has stalled, or died. I doubt the latter will occur, but we should be prepared, nonetheless, for a potentially painful correction into the high 20s.
We'll stay on high alert as March Silver ascends into thin air. Like gold's chart, the overall impression this one creates is of heavy distribution since last spring. A telling feature is the failure of the rally in early February to exceed mid-December's 'external' peak. That would have created a robust impulse leg, but it ultimately took another pullback and a running start to get it done. The short-term picture turned somewhat bearish with Friday's close beneath a midpoint Hidden Pivot support at 32.895 that had previously contained the downtrend from the Feb 14 high. Accordingly, you should look for more slippage to at least 32.450, or to 32.005 if any lower.
