Thursday, November 3, 2011

Silver Flag Pattern Predicting an Imminent Rally to $140?

Hubert Moolman has noticed a striking resemblance between the flag formation developing in silver's 2-year price chart and an almost identical pattern in gold during the summer months of 2007.
Gold broke out from its flag formation in 2007 and rallied to an all-time high of $850.  A similar percentage move in silver based on the formation would see silver rallying to $140 at a minimum.
If we can get though the weekend without a major raid/MF Global liquidation, silver looks to rise to the upper downtrend line on its flag formation- setting up a major move if it can clear the $38-$40 resistance.

The gold chart is the top one. I have marked similar points (1 to 5), on both charts, to illustrate how the patterns are similar. Note, that the silver pattern is a much larger pattern (time-wise). I have also indicated where I think we are currently, on the silver chart, compared to the gold chart.
It is important to understand that these patterns cannot be randomly compared. One has to determine whether the context in which they exist, are similar. I deal with this in more detail, in my special Fractal Analysis reports. Also, most importantly, the fundamentals should also tell the same story, within context.
So, what happened next on the gold chart, and therefore, by extrapolation, what is likely to happen next on the silver chart? Below, is the gold chart, illustrating what happened after the formation of the pattern.

The gold price rose significantly over the following couple of months, making all-time highs.
If you measure the price distance between the low, and point 2, you will find that the gold price went three times that distance, higher than point 2. If silver emulates that, it should go to $140 (30*3 + 50) as a minimum. Due to the nature of silver, it is likely to better gold's performance.
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