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The Silver Price Squeeze: Update
Brent Harmes
Quick Summary:

This was the current chart of silver during the last newsletter.

I wrote, "The reason that these patterns are called coils is because as the prices get traded in a smaller and smaller range. It is like winding up a spring. At some point the spring is going to come unwound quickly and it is usually spectacular. You can also think of a tube of toothpaste with the cap still on it. If you wind up the end tighter and tighter forcing more paste into the narrow cap area, at some point it is going to blow. Look at the first coil pattern we had, it is a classic case."

I also mentioned, "If the price stays in this coil pattern all the way to the end of the apex, then the whole pattern usually fizzles without the break out. This is part of the reason that if a breakout is going to occur it will probably happen relatively soon, so we may have one more pull back at the most. . It will be interesting to see if things remain this rosy on the oil price outlook after the election. That could prove to be a key turning point. Coincidentally, that is about where the apex of the coil pattern lies."

Now let's fast forward to today's chart, zoom in on the current coil pattern and take a look.

Silver prices actually crossed the top line of the coil pattern a few days ago however to confirm the breakout several things needed to occur. First gold needed to break out of its coil pattern (which it actually did before silver did).

Then both gold and silver needed to have a daily closing price 3% or more above the top of their coil pattern. This 3% is a trader's rule of thumb number to ensure that a little "overshoot" of the price doesn't cause you to jump into a market that just strayed outside of its pattern temporarily, only to resume the pattern the next day. This 3% confirmation happened today, and it happened with gusto.

Now, let's take a quick look at oil.

Oil had an up day today. It is pushing to the outside of its channel. It is too early to confirm a 3% breakout like silver and gold have had but at turning points in the market not everything turns exactly at the same time.

Commodities in general.

The commodities index continues its uptrend (Good News).

To summarize I would like to restate the last paragraph from The Silver Squeeze newsletter.

So how do I play this?

Some items to consider:

  • We may get one more pull back before a breakout, or we might not.
  • If you are going to wait for the price to breakout of the coil pattern to confirm direction then you will have to be on the edge of your seat because it should happen pretty fast and you'll probably miss a good part of the move.
  • If you are considering adding to your precious metals portfolio you might want to get started or at least get ready. During this current bull market second chances have not happened often.

Gold & Silver Newsletter
http://goldsilver.com
Brent Harmes, Editor-in-chief
brent@goldsilver.com


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