My Price Predictions for Silver

09/27/2010 12:28 pm EST

Focus: ETFS

Corey Rosenbloom

Founder and President, Afraid to Trade

With silver screaming to new price highs, it’s time to pull out the Fibonacci price projection tool to see where upper indicator price confluences exist. But first, here's the chart:


Click to Enlarge

The main idea is that you pick a key swing low, draw the tool to the next swing high, and then draw down to the next swing low (higher than the prior low).

The Fibonacci Tool then projects the appropriate price levels for you.

You can do that on a single swing to find likely price targets to play for (or overhead resistance levels to try to short into), or you can do what I’ve done above and draw multiple Fibonacci Projection Grids to find not one level, but where levels converge or form tight confluences.

These levels are often more important than single levels.

That being said, I’ve labeled each of the four Projection Grids above in different colors.

Cutting through all the levels, there are TWO upside Confluence Zones:
C1:  The First Confluence Target is just under $22.00 at the $21.80 level.

That’s not too terribly high from where we are now.  This is the confluence of the Blue Grid’s 100% projection and Green Grid’s 161.8% Projection.
C2:  The Second Confluence Target is just above $24.00 at the $24.50 level.

This confluence reflects the 261.8% projection of the Red Grid; 138.2% of the Blue Grid, and 138.2% of the Purple Grid.

Longer-term Grids often hold more importance than shorter term grids—if you have to pick a level of most importance (sort of like longer-term trendlines hold more importance than shorter-term trendlines).

Anyway—the key will be watching what happens at $21.80 or $22.00 (which translates to the $21.50/$22.00 level in the SLV ETF). If we start to see reversal candles or other sort of sell signals there, it might be wise to take profits.

If Silver does not stop at $22, then the next upside target becomes $24.50.

Keep these levels in mind in the weeks or even months ahead.

Corey Rosenbloom is a trader and blogger at AfraidToTrade.com.

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