Reading from the five-year weekly chart above, the first major resistance point in silver is $22,50 on the spot contract, where we are now as I am writing. A high potential break upwards through $22.50 and close above should negate the last bearish structure, shown as the corrective falling A-B-C channel in the chart.
A break up will open for a more bullish 5 wave trend move and longer-term bullish outlook. The importance of the pivot around $22,50 cannot be overestimated because it can ignite a multitude of new higher targets.
The first mathematical objective is around $24.60, but the overhand is between $29 and $30, which I think will be seen. If $30 is broken properly (weekly close) then the real party begins. If it happens, you will read articles with objectives at $50 and even $100 come alive. The $50 can be argued from a chart point, the rest is not relevant now.
One way to engage could be here around $22,50. Another way is to give it time for a setback towards $21,50 or wait till the price has broken the $22,50 level decisively. My own preferred approach is to be both early and late, eventually do all three points, thereby keeping the exposure in line. Selling here is not in my cards.
To project this outlook and your position, the price of silver must stay above $17,50 structurally, but that is too far away, why we have a trading stop put in at a close below $20, keeping the risk in line. This provides for a very attractive risk reward play. Remember the weaker USD of late, together with the Federal Reserve, they have given markets a nice run already, so we might be in the last steps of the first move upwards in silver. Yours truly is not too comfortable with the current stock market levels in the West.
Another way to play this, outside silver futures, Exchange Traded Products, Contracts for Difference and Spread Betting, is through silver stocks, which have lots of leverage and beta towards the silver price, but also towards the general stock market, so start easy here. Project developers will have the most torque, where producers and royalty companies will be the safer plays, because of their positive cash flow and thereby their own ability to stay alive without extra oxygen through financings, since they all are profitable at $20/oz silver.
Henrik is an Investment Advisor and Strategist with Iridis AG, a wealth and investment development company in Zug, Switzerland.
www.thearmchairtrader.com