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Silver: Is it a breakout or a breakdown?

Silver is a dreadful investment.  The price moves within a tight range, and whenever you think it’s going to breakout to the upside, the price gets smashed.  It works the other way.  The moment it starts falling into the abyss, it gets magically lifted.  This means that there is no opportunity to make serious money with silver.  You have to trade it nimbly, or else gather pennies by selling out of the money options.  However I am not convinced that the situation will go on for much longer.

Let’s look at the price of silver, since January 1 2015.  The minimum price was around $13.50, the maximum just short of $21, the 25th percentile $15.83, the median $16.67, the 75th percentile $17.33.  As you can see, from January 1 2015 the range is very tight, and it’s getting tighter:

The three horizontal red lines represent the 75th percentile, the median and the 25th percentile.  So for approximately 75% of the time, from 2015 onwards, the silver price was between $15.83 and $17.33.  The white lines show support and resistance.  As time progresses the price is bouncing with a narrow and narrower range, and in the late summer the white lines will cross.  I would therefore expect that over the next few months the silver price will breakout or break down, as it makes a sharp move out of its trading range.

If there is a breakout rather than a break down, we might expect it to happen on the median point, and to encompass the whole range from minimum to maximum.  The range in price since January 2015 is around $7.13, so adding that onto the median gives us a breakout target of $23.80, by the end of 2018.  A breakdown target, by contrast, would be $9.54, but my bias is for a breakout, not a breakdown.

 

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