- Silver prices surged sharply, doubling from Rs 1.4 lacs to Rs 2.8 lacs in 64 sessions
- A sudden 46% price drop occurred in three sessions, causing major losses for traders
- Silver futures show a corrective Elliott wave pattern with consolidation near Rs 2.4 lacs
Silver moves over the last few months have astounded every one across the world. It has moved past everyone's targets by substantial margins and got the attention of all traders across the world.
Suddenly, everyone had a story about silver shortage across the globe and even though the story of industrial usage has been touted for decades, this took on entirely new dimension over the last six months. News of backwardation and denuding of storage vaults in London and China etc. added to the fuel. Result: a parabolic upmove.
The sharpest portion of the rise occurred from the lows near Nov. 25 bottom and the metal raced to its highs in about 64 sessions and doubled in price at the local MCX (from Rs 1.4 lacs to Rs 2.8 lacs). It became the talk of the town.
Then in just three sessions, the metal fell headlong, wiping out about 46% from the highs. This was too large and too swift and chances are many of the traders may not even have got a chance to exit. The next several days were spent with unwinding of a lot of positions.
The chart of silver shows the corrective leg over the last month. I am marking it with an Elliot triangle of five waves, A through E.
With 46% damage in wave A, it was a given that all subsequent waves shall remain subnormal. Thus, we see a consolidation pattern for waves B through E.
The halt of the decline and the consolidation around Rs 2.4 L was around the 62% retracement of the last leg of the advance. Now with pattern completion, we may witness rally.
The metal has been in a corrective move for 11 sessions so far after recording the high. Even if we take the nearest leg from Nov (65 sessions to the top), the time correction, despite a triangle correction, is still way too short. Thus, one can expect that we may be in for an extended correction, a kind of WXY pattern, to complete the next correction.
Currently, the next rally may curtail around Rs 3 to Rs 3.25-lac level and then get retraced once again.
Thus the current chart situation of Silver futures seems to be suggesting that the frenetic trended moves of the last several months may be over and now, we may be in for a many weeks of limited moves with prices ranging. While the low region around Rs 2.25 lacs may not get broken, large upward gains also may not be possible.
Silver is going to take a breather. Traders should do likewise.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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