The price of silver fell to as low as $13.90 on November 14th. It has been recovering ever since and is trading above $15.90 as of this writing. This means silver has gained over 14% in just two and a half months, making it one of the best investments in 2019 so far.
The bad news is that past performance is not always indicative of future results. Just because XAGUSD has been rising recently doesn’t mean it is going to keep the uptrend going. In order to find out what the market’s intentions are, we need to take a look at silver’s behavior through an Elliott Wave perspective.
The 4-hour chart of silver reveals that the structure of the rally from $13.90 forms a textbook five-wave impulse, labeled 1-2-3-4-5. Unfortunately for the bulls, the Elliott Wave theory states that every impulse is followed by a three-wave correction in the other direction.
This means that the bears are poised to return as soon as wave 5 ends. The anticipated corrective decline has the potential to drag silver prices back down to $15 or even lower. The MACD indicator supports the negative outlook with a bearish divergence between waves 3 and 5.
If this count is correct, it is too late to join the bulls as silver is likely going to make a U-turn very soon. On the other hand, picking tops is not worth the risk. It is too early to join the bears, either. In our opinion, waiting on the sidelines is the best silver traders can do until this high-risk phase of the cycle passes.
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