Silver Price…Overbought Can Develop Into A Sign Of Strength

Silver’s monthly TD Sequential 9 Buy Setup in October (nine consecutive closes below four months earlier) has now been followed by an upside breakout on the daily and weekly charts.

In the development of the rally from $14, the weekly CCI(8) and CCI(13) indicators have become Over-bought as of Friday as the silver price pushed against the 50-week exponential moving average. Such Bearish Springboard readings capped the price during the 2014-15 decline as well as 1983-86, 1989-92 and 1999-01. However, if prices can remain firm into mid-January, then such a ‘Sign of Strength’ would suggest that a significant trend change is underway. The 20 and 50-month emas would then be anticipated to provide support. Such pullbacks normally produce a daily Springboard Buy (9/29/82, 9/29/86, 6/14/83, 1/02/02, 3/03/09 and 2/26/16).

Springboards are defined as the ending phase of minor corrections in flat or trending markets. The first two Springboard alerts (Bullish or Bearish) in a newly emerging trend, as seen in February and May 2016, should ideally happen on corrections that give back no more than 50% of the preceding move. However, 62% is acceptable.

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