Last week, we published a research article on Silver Junior Miners that garnered quite a bit of attention. We received quite a few positive comments and questions from our friends and followers. This time, we wanted to dig a little deeper into the cycles and price setups that are currently setup in the Silver and Junior Silver Miners ETFs. It may seem odd to some readers, but we believe the uncertainty related to the US election and US policy over the next 6+ months could present a very real opportunity for skilled technical traders.
First, if you missed the previous analysis and trade idea in the Silver Junior Miners article from November 2, please follow this link to review our earlier research which has some important points you should know.
That research article from November 2 suggested a Pennant/Flag formation on the longer-term Monthly chart would prompt a large upside price move once a potential “washout low” pattern setup. The election day trend in Gold and Silver prompted Silver Miners to move a bit lower – which is what we suggested would happen in the November 2 article. Now, we’re going to highlight two incredible longer-term setups in Silver Miners that may result in almost immediate profits over the next 4+ months.
Weekly Silver Miners Chart
This first Weekly SILJ chart highlights a “100% Fibonacci Measured Move” process that is likely to take place in the near future. The current support level near $13.00 suggests a momentum base level has established in Silver Miners. If a 100% measured move takes place, mimicking the move from the COVID-19 lows to the August 2020 highs, it is very likely that the next upside price move in SILJ may rally to levels above $24.00 to $25.00. This represents an 82%+ price advance over 3 to 4+ months.
Monthly Silver Miners Chart
This next Monthly chart highlights the SPX500 to Silver ratio (in BLUE with the scale on the RIGHT EDGE of the chart) and shows the historical Silver price level (in GOLD with the scale on the LEFT EDGE of the chart). The important factors on this chart are the 15 year cycle events, highlighted near the bottom of the chart, and the breakout setup that appears to be taking place right now between the price of Silver and the SPX500 to Silver ratio.
First, the Breakout ratio. This ratio of the SPX500 divided by the price of Silver shows that, throughout history, a roughly 15 year advance/decline cycle oscillates between a peak in Silver prices to a peak in SPX500 prices. In 1979~1980, the peak price of Silver rallied to levels near $36. Then, silver fell out of favor as the US stock market rally took hold in 1986~1988. Recently, the peak price level in Silver in 2011, near $49.00, prompted another price breakout event which was similar to the one in 1977.
We believe another breakout event is pending as global market uncertainty and global debt levels continue to weight heavily on Precious Metals. The recent breakdown of the BLUE ratio level as well as the upside breakout/rally of Silver suggests an early phase breakout is setting up. If this research is correct, an extended price rally may take place over the next 4~5+ years in Silver that will prompt the ratio level to fall back below 60~75. We believe the upside breakout event could happen at any point over the next 3 to 6+ months and may last for a period of 6 to 18+ months before reaching a peak.
Our researchers believe the ultimate upside peak level for Silver throughout this breakout rally may be somewhere above $65per ounce. This level is based on historical rally events and the location of the current Silver price momentum base (near $13).
Overall, the cycle event suggests the peak level may extend well into 2026~2028. So, in an extreme cycle event, we may see a massive price rally that does not peak until 2026~2028. We can’t imagine a price level in Silver that extends upward from the current base level to reach lofty peaks that far out. Although we can safely guess that this extended breakout rally may likely prompt Silver prices to breach the $100 per ounce level at some point.
All of this research is longer-term in nature, so please understand that we are waiting for a confirmed longer-term trigger to initiate these setups. The washout low pattern currently taking place after the Apex of the Flag/Pennant formation is a very solid trigger. If we were to start to see a rally in Silver prices before the end of 2020, we would likely see the Ratio trigger confirm very early in 2021. Once this happens, we would be foolish not to pay very close attention to this trigger because is has proven to be very accurate historically.
I hope this analysis assists you in finding and executing better trading decisions. I use a BAN trading strategy (Best Asset Now) to find these setup, and have a few more that should give buy signals this week or next. It is a very powerful way of finding the next market leaders.
Chief Market Strategist
Disclaimer: Our free research does not constitute a trade recommendation, or solicitation for our readers to take any action regarding this research. It is provided for educational purposes only. Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.