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Elliott Wave View: Silver Pulling Back within Bullish Trend

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Silver (XAGUSD) formed a high on February 1 at $30.09 during the reddit #silversqueeze event. Since then, the metal has continued to pullback. The decline from February 1 peak is progressing as a zigzag Elliott Wave structure where wave (A) ended at $25.87, and wave (B) ended at $28.33. Internal of wave (B), as seen in the 1 hour chart below, unfolded as a Flat correction. Up from wave (A), wave A ended at $27.95, wave B ended at $26.09, and wave C of (B) ended at $28.32.

Wave (C) lower now remains in progress as a 5 waves impulse. Down from wave (B), wave ((i)) ended at $27.22 and bounce in wave ((ii)) ended at $28.2. The metal then resumed lower in wave ((iiii)) which ended at $26.1, and wave ((iv)) ended at $27.07. Expect wave ((v)) to end soon and this should complete wave 1 in larger degree. Afterwards, expect Silver to rally in wave 2 to correct the decline from February 23 high (28.3) before it turns lower again. As far as pivot at 28.3 high stays intact, near term rally can fail and Silver has scope to extend lower to end wave (C) from February 1. Potential support area is 100% – 161.8% Fibonacci extension from February 1 peak which comes at $21.4 – $24.07.

XAGUSD (Silver) 60 Minutes Elliott Wave Chart

Silver Elliott Wave ChartXAGUSD Elliott Wave Video

Silver Should Outperform with Break Lower in Gold-To-Silver Ratio

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Gold-to-Silver Ratio is simply gold price divided by silver price. After spiking to all-time high at 126.4 on March last year to 126.4 due to the fear of Covid-19 pandemic, it has turned lower considerably.  The average ratio in 300 years history is around 30 as the chart below shows:

The natural ratio in the earth’s crust, according to some mining producers, is around 8 to 1. That means every 1 ounce of Gold mined, there is 8 ounces of silver. If one just simply uses the average ratio of 30 to 1 and apply to the current price gold, that suggests the price of silver should be $1820 (per February 4, 2021) / 30 = $60. Yet, the price of silver today is only $26 which suggests the metal is undervalued.

This week, due to the rumor of the Reddit community trying to target Silver, the metal has spiked 10% over the weekend and take out last year’s high of $29.8. It has since completely reversed the spike, but nonetheless the break above last year’s high carries significant technical implication. Gold-to-Silver ratio has also broken lower creating a bearish sequence since last year as the chart below shows

Gold-to-Silver (GSR) Ratio Elliott Wave Chart

Gold-to-Silver ratio

The chart above suggests the decline from 3.18.2020 high is unfolding as an impulsive 5 waves and ended wave a at 68.90 on September 2020. The ratio since then has been consolidating and ended wave b at 85.14. It has broken below wave a again this week suggesting the next leg lower has started. This ratio is inversely correlated with the underlying physical gold and silver. In other words, when the ratio breaks lower, the price of Gold and Silver will trend higher with Silver outperforming Gold.

Silver (XAGUSD) Elliott Wave Chart

After bottoming on March 18, 2020 low during the Covid-19 selloff, Silver rallied impulsively from $11.64 to $29.86 in a matter of just 5 months. That rally ended wave I or A. It then corrected 27% in just a little over 1 month ended wave 2/B at $21.6. With this week’s price action, Silver manages to take out wave I/A and creates a bullish sequence. Furthermore, the rally from wave 2/B low is in 5 waves (diagonal), suggesting further upside is likely while pullback stays above there. Alternatively, Silver can do an expanded flat in which 9.25.2020 low is wave ((A)) and the marginal high is wave ((B)), and now can see wave ((C)) of II/B lower which can potentially break below 21.66 before the metal rallies higher again. This view however is not our primary view as we don’t forecast a flat against a clear trend.

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Elliott Wave View: Silver Broke to 52 Week High

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Silver has made a new 52 week high this week suggesting last year’s correction is over. From the 60 minutes chart below, we can see the rally from January 18 low is unfolding as a 5 waves impulsive Elliott Wave structure. Up from wave ((2)) low on January 18, wave ((i)) ended at 25.56, and pullback in wave ((ii)) ended at 25.01. Wave ((iii)) ended at 25.9, wave ((iv)) ended at 25.67 and wave ((v)) ended at 26.04. This completed wave 1 in higher degree.

Silver then pullback in wave 2 which ended at 24.68. Internal subdivision of wave 2 unfolded as a zigzag structure where wave ((a)) ended at 25, wave ((b)) ended at 25.46, and wave ((c)) ended at 24.67. Silver continued to rally higher in wave 3 towards 30.09 as another impulse in lesser degree. Up from wave 2 low, wave ((i)) ended at 27.65, wave ((ii)) ended at 26.65, wave ((iii)) ended at 29.01, wave ((iv)) ended at 27.93, and wave ((v)) ended at 30.09. Pullback in wave 4 is expected to be still in progress towards 27.24 – 25.97 area from where rally should resume in wave 5 or we should get a 3 waves bounce at least.

Silver 60 Minutes Elliott Wave Chart

Silver 60 minutes Elliott Wave Chart

 

 

Elliott Wave View: Silver Still Consolidating Gain in 2020

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Short Term Elliott Wave view suggests the rally from September 24, 2020 low in Silver ended wave ((1)) as a leading diagonal. Pullback in wave ((2)) is now in progress as a zigzag Elliott Wave structure. Down from wave ((1)) high, wave 1 ended at 26.58 and bounce in wave 2 ended at 27.35. The metal then extended lower in wave 3 towards 24.45, and bounce in wave 4 ended at 25.5. Final leg lower in wave 5 ended at 24.31. This completed wave (A) of the zigzag in higher degree.

Bounce in wave (B) is currently in progress to correct the decline from January 6 high as a zigzag in lower degree before the decline resumes. Up from wave (A0 low at 24.31, wave ((i)) ended at 25.23 and wave ((ii)) ended at 24.52. The metal resumed higher and ended wave ((iii)) at 25.61. Pullback in wave ((iv)) ended at 25.08. Expect the metal to end wave ((v)) of A soon, then pullback in wave B before another leg higher in wave C to end wave (B). Afterwards, as far as pivot at 27.92 high remains intact, Silver has scope to extend lower.

Silver 60 Minutes Elliott Wave Chart

Silver Elliott Wave Chart

Silver (XAGUSD) 60 Minutes Elliott Wave Chart

Pan American Silver (PAAS) Has Resumed Rally Higher

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In our last article on Pan American Silver Corporation (ticker: PAAS) dated November 25 last year, we suggest that the stock is about to end correction and resumes higher. This is the chart we provided last November looking for buyers at the blue box.

Fast forward to the new year, the stock failed to reach the blue box and has started to turn higher. With the new second round stimulus check approved by congress as a bipartisan bill, and Georgia Senate election possibly tilting towards the Democrats, market is preparing for even further stimulus and money spending by government.

This article today gives an Elliott Wave update on PAAS

PAAS Monthly Elliott Wave Chart

The monthly chart of PAAS above shows the rally from January 2016 low is in progress as a 5 waves impulsive Elliott Wave structure. Wave ((4)) of III has ended at $28.33 and the stock has started to resume higher again. Expect more upside to end wave ((5)) of III, then it should pullback in wave IV before turning higher again. The stock is still in very early stage of a wave ((III)) move in Grand Super Cycle degree to the upside.

PAAS Daily Elliott Wave Chart

Daily Elliott Wave chart above shows the stock has broken above the descending bearish trend line from August 2020 peak, suggesting the cycle is over. The stock still needs to break above that peak to signal the correction is complete and rule out a double correction. However, a look of the rally from wave ((4)) low suggests the structure of the rally is a nesting impulse, favoring the idea that the correction is completed.

PAAS 4 Hour Elliott Wave Chart

PAAS Pan America Elliott Wave Chart

The 4 hour chart of PAAS above shows the rally from November 24 low (28.33) unfolding as a nested impulsive Elliott Wave structure. Expect the stock to continue moving higher in coming days / weeks to end wave ((5)) of 3 in 5 waves before a pullback happens and stock resumes higher again.

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Silver Miners (SIL) Close to Ending Correction

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One of the best ways to play the silver rally, if one believes in the bullish thesis, is through the Silver Miner ETF (SIL). The share price of these publicly traded mining companies usually climb faster than the precious metals that they produce during the bull market phase of the underlying metal. Since forming a top on August 6, 2020 high at 52.87, Silver Miners ETF (SIL) has continued to consolidate the gain. The internal subdivision of the pullback so far looks corrective, favoring further upside. We analyzed the Elliott Wave Chart of SIL below in Monthly and Daily time frames.

$SIL Monthly Elliott Wave Chart

Monthly chart of SIL above shows potential basing pattern since Jan 1, 2016 low. The ETF did a retest of that level earlier this year on March 3 during the Covid-19 selloff. We labelled that pullback as wave II which ended at 15.72. Since then the ETF has rallied again. The key resistance at $52 is still holding for now but a clear break above this line can turbocharge the rally in the sector next year. The ETF is currently looking to end the correction to cycle from March low and expected to find support in 3, 7, or 11 swing for more upside.

$SIL Daily Elliott Wave Chart

Daily Elliott Wave chart of SIL above shows the rally from wave II low on March 1 ended wave ((1)) at $52.87 as an impulsive Elliott Wave structure. Wave ((2)) pullback is in progress to correct cycle from March 1 low before the rally resumes. Structure of wave ((2)) looks corrective and unfolding with a possible double three corrective Elliott Wave pattern. Down from wave ((1)) high, wave (W) ended at 40.62 and wave (X) ended at 48.45. Wave (Y) is expected to find support in 3 or 7 swing. The next 100% – 161.8% extension area comes at 26.8 – 36.3 where buyers can appear for new high or 3 waves bounce at least. Expect the ETF to continue higher again in a strong wave ((3)) rally once current correction ends as far as pivot at 16.09 low stays intact.

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