The Long-Term Outlook For Silver Is Very Positive

silver 600X300The long-term outlook for silver is very positive indeed, but over the short to medium term it looks set to react, says technical analyst Clive Maund.

Silver 10-year chart

On its short-term 3-month chart (below), we can see that, after rising sharply late last month, a sizeable bearish “shooting star” appeared on the chart on heavy turnover at the start of this month, at a time when silver was critically overbought, which indicates a high probability that silver will react back soon.

Silver 3-month

On the 6-month chart we can see why silver might react back here—it has just arrived at the top of an expanding uptrend channel in a very overbought state. Thus, a reaction back looks likely, and this would be a healthy development that sets it up for the next up-leg. Given the current COT structure it would not be unreasonable for it to drop back to the support shown in the $18 area over the short- to medium term.

Silver 6-month

The long-term 10-year arithmetic chart gives us a much broader perspective. This is actually a very positive chart overall, for as we can see silver’s bear market phase from 2011 has definitely ended. However, it has risen quite sharply in recent months to arrive at a zone of significant resistance, so it would be quite normal for it to consolidate or react back here, before breaking above this resistance and continuing higher.

Silver 10-year chart

Silver has also broken out to start a new bull market on its 10-year log chart.

Silver 10-year chart bullmarket start

As with gold, Commercial short and Large Spec long positions in silver have built up to a very high record level, making a reaction back soon a high probability.

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