Cup and Handle Chart Pattern Says Major Upside for Silver Prices Ahead
We could see silver prices spike to $95.14 an ounce. The below chart pattern says so.
Before going into any details, it’s important to know about the chart pattern that technical analysts call a “cup and handle” pattern.
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At the most basic level, a cup and handle chart pattern is a bullish continuation pattern that is formed as a result of consolidation, and it’s followed by a breakout to the upside. This chart pattern has two parts, as the name suggests: a cup and a handle.
A cup is formed after the price has made a relatively round bottom. There are two peaks: one to the left and another to the right. A handle is formed when there’s a peak in place, and a trading range develops on the right-hand side.
A breakout occurs once the price breaks above the peak on the right side of the cup.
With this in mind, look at the long-term chart of silver prices below. The cup and handle pattern is very evident in silver prices.
Chart courtesy of StockCharts.com
Now, when it comes to technical analysis, there are almost always targets associated with chart patterns. With the cup and handle chart pattern, technical analysts look at the right peak of the cup and measure the distance until the bottom of the cup. Then they add that value to the peak that was most recent.
In the silver price chart above, if we assume the bottom of the cup to be around $4.50 and use the highest price in 2011 as a peak of $49.82, then the difference is $45.32.
With this, if you add $45.32 to the highs made in 2011, you get silver prices at $95.14 an ounce. If this actually happens, that would mean an increase of over 470% from where it currently trades.
How Long Could It Take for Silver Prices to Reach $95.14 per Ounce?
Dear reader, before jumping to any conclusions, understand that for silver prices to get to over $95.00 an ounce, it’s going to be an uphill battle. Don’t expect it to happen right away.
Understand that this cup and handle pattern took close to 40 years to make. Similarly, it could take several years for this pattern to play out, and for silver prices to increase roughly 470%.
Also understand that there are certain fundamentals that need to be aligned for this move to happen. For example, we need investors’ sentiment to be in favor of silver, with extreme buying, soaring inflation, wild fluctuations in major currencies, other asset classes showing dismal returns, and out-of-control money- printing by central banks.
But, when silver prices start to move higher, know that the best place would be the silver mining companies. They provide leveraged gains to silver prices. For instance, in just the past year, as silver prices increased around 20%, some mining stocks have more than doubled.
If silver prices increase 470% from current levels, it wouldn’t be shocking to see some silver miners post gains of 1,000% and beyond.
Obviously, with time, we will know more.
