Is silver on the cusp of a multiyear breakout? Here's what the charts say

ChartWatch is a regular segment of our Evening Wrap where we discuss the technical outlook for major stock indices, commodities, crypto, bonds, and forex.

In tonight’s Evening Wrap, I was going to discuss the big moves in COMEX Silver Futures this week, but given the spike in interest among investors, I thought it would be useful to make the analysis a standalone article for our broader readership to enjoy.

Silver Futures (Front month, back-adjusted) COMEX – Daily Chart (click here for full size image)

Can you believe the last time we covered silver was all the way back in ChartWatch in the Evening Wrap on 27 March?

In that update, quite an interesting one too…I noted that silver was growing closer to a “put up or shut up” moment. Basically, my theory was that silver had been touted as the next big thing for so long, that if it couldn’t crack “monster” supply at the 35.77-36.12 zone (values have been updated due to contract rollovers) – then with the demand-side already committed, there was little impetus to rise any further.

I can’t take credit for the plunge that happened next – that’s all President Trump’s doing – but it does highlight one major issue for silver: It has been touted for so long, it has some of the most ardent and committed true believers among any of the commodity zealots, and as is often the case in these matters – if all the true believers are already in – then who’s left to buy? 🤷

We’re about to find out. Put up or shut up – it looks like silver is finally trying to put up!

The other reason why I haven’t covered silver since March, is it simply hasn’t warranted it. Churn, chop, scrape and scrounge 📈📉📈📉. But as we can see from the chart above, Monday’s long demand-side candle has sparked new interest. Note though, Tuesday’s and Wednesday's smaller candles are just as important!

This is the nugget from this analysis (rather than where silver's going next!):

• When you see a long demand-side candle* and the next couple are small candles that push only very slightly back into the demand-side candle’s range (downward pointing shadows are ideal) = corresponds to strong demand-side control = price is far more likely to go higher.

The opposite is also true, so:

• When you see a long supply-side candle* and the next couple are small candles that push only very slightly back into the supply-side candle’s range (upward pointing shadows are ideal) = corresponds to strong supply-side control = price is far more likely to go lower.

Thursday’s candle (i.e., the second last on the chart above because the last candle is today’s live candle), confirmed the demand-side’s new control, and importantly has also punched a big hole in the excess supply at 35.77-36.12.

Note though, the upward pointing shadow on Thursday's candle demonstrates that supply did have some ammunition and pushed back. Still, by the close, I put it to you that the demand-side is still very much in control here.

Today’s candle is live, so discount it. What we do know is this:

• Short and long term trends are up, and both trend ribbons appear to be acting as zones of dynamic excess demand, both appear to be accelerating ✅

• The price action rising peaks and rising troughs, showing demand reinforcement and supply removal ✅

• There is once again a clear predominance of demand-side candles ✅

Really, only the consumption of any lingering supply at 35.77-36.12 stands in the way of a higher silver price.

As for how you'll know it's all gone horribly wrong...that would be on a close below the $34 point of demand / short term uptrend ribbon which are now nicely coinciding with each other.

Ok, putting worst case scenarios aside, the big question then becomes how high can silver go? Let’s look at the weekly chart.

Silver Futures (Front month, back-adjusted) COMEX – Weekly Chart (click here for full size image)

Ok, not bad…But what’s great about this chart is if Silver can make it stick tonight – it will be the highest weekly close in the last 5-years. That’s because the last couple of times silver was up here – it suffered intraweek reversals and therefore threw in those upward pointing shadows. So, it’s a big daily/weekly candle close coming tomorrow morning our time.

But silver’s potential gets really interesting when you switch out to the monthly chart…

Silver Futures (Front month, back-adjusted) COMEX – Monthly Chart (click here for full size image)

Yep, really interesting indeed! 🤔

A move to 42.68-45.03 is not an inconceivable first stop. But silver is notorious for false starts and falling back into churning, drawn out consolidations. All three timeframes demonstrate this. So, it's important to knock that 35.77-36.12 with an emphatic demand-side candle with high close.

One thing you must understand about me, is that I’m not a silver bug (nor a gold bug, nor any other type of commodities bug for that matter!). I cannot possibly express to you just how little attention I pay to narratives – in commodities markets or anywhere else for that matter.

As far as I'm concerned, commodity narratives aren’t worth the hot air blowing from those that espouse them…and that’s a lot of hot air (gold, silver, copper, lithium, uranium, rare earths etc.!)! 💨💨💨

You know me: I only care about D + S = P. So, I am not trying to convince you of some great silver narrative here…I’m simply pointing out that for now, in the silver market: D > S = P⬆️

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*A demand-side candle is one that has a white body and or a downward pointing shadow. The longer the demand-side candle, the greater the degree of excess demand in the system it demonstrates.

*A supply-side candle is one that has a black body and or an upward pointing shadow. The longer the supply-side candle, the greater the degree of excess supply in the system it demonstrates.

Learn more about Carl's technical analysis methodology by reading his Technical analysis for beginners: ChartWatch primer.