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December 11 Chart of the Day - Silver

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According to the Silver Institute, Silver (/SI) "has been considered a precious element for 6000 years. It was first used as a currency in 700 B.C. and has had a role as a trading metal in nearly every ancient and modern culture.

From the drachma of the ancient Greeks, which contained an eighth of an ounce of silver to the Roman denarius and the British pound sterling, which designated a specific weight amount of the element, silver has long held a special place as a store of value."

The silver market refers to the buying and selling of silver as a commodity or an investment asset. In the global market, silver is traded in various forms, including physical silver bars and coins, silver futures contracts, and silver exchange-traded funds (ETFs).

Store of value perhaps but relatively speaking not one that has significantly appreciated during its long history compared to other asset classes.

Today we'll take a look at the Silver futures market.

From a price action technical analysis perspective we can see on the monthly chart that despite multiple attempts to break out since the early 1970s price has spectacularly gone nowhere.

That's not to mean that traders or investors can move in and out of the asset in an attempt to make profits.

We can see that price has formed a change control zone roughly between $24.18 and $26.15

Change control zones are one of the five price action tools we teach when charting anything.  By definition, they are an area that represents where neither the bulls nor bears are in charge.  Price can slash though the zone with seemingly reckless abandon, price can respect the top or bottom from outside it or within it.  Or, price can trade aimlessly sideways within it.  When price breaks away from the zone it can often get drawn back to it like a magnet. And in this case we see all of the above are true.

Price has crossed this zone a whopping 20 times during the past four decades with 14 of those occurrences happening since the summer of 2020.  Additionally, 19 times price respected the zone's edges from within, above, or below.  Keep in mind, this is from a monthly perspective.

Now that's what we consider a price magnet!

Down on the weekly chart we can see that price traversed the zone 17 times during the past 18 months including 3 times since Halloween and is now rapidly falling below it towards potential structure in the form of a bull Fibonacci retracement.

Should price decide to revisit the zone again we've identified levels of interest where price could turn back to the upside with the $20 area ultimately looking like a "line in the sand" for the silver bulls.

So what's next? 

We don't make predictions...

Nobody knows for sure but using these 5 price action tools traders and investors can develop levels of interest in both directions.

  1. Support/Resistance
  2. Trend
  3. Fibonacci 
  4. Supply/Demand Zones,
  5. Change Control Zones

Take a look at the charts and let us know what you think.  

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