Since then, the silver market’s price buying momentum picked up and has been in a strong upward trajectory.
In fact, right now the silver price is trading at around $16.52, which is just 78 cents away from hitting my target price of $17.30.
But today, I’m raising the target price so we can make even more profits.
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Fund managers are piling into silver
During the recent reporting week for the data compiled by the Commodity Future Trading Commission, it was stated that Fund managers have extensively increased their positions in the silver futures market.
And when you look at the CFTC data (gauge level that reveals the general mood of the buyers and sellers), the report showed that money managers are net long in silver futures.
In fact, the number of contracts from three weeks ago has already jumped triple from 27,764 up to 51,656 contracts.
The higher the number of buyers, the higher we can expect the price of silver to move.
Why silver looks to the Fed for direction
Since early this year, the Fed has been hinting that sometime in 2019, they will lower the interest rates.
Fast-forward to today and it looks like the time has nearly come…
As of last week, we had the main economic event start on Tuesday with the FOMC (Federal Reserve’s Open Market Committee) where they were to meet to determine the monetary policy.
The Fed was expected to lower interest rates on Wednesday afternoon as market watchers and senior analysts prepared for a 25 basis points cut.
They will continue to expect further interest rate cuts this year as the wage growth, economic growth and domestic inflation continues to slow down.
But here’s what we want to know as traders
If the Fed decides to further drop the interest rate, the more appealing it will be for traders and investors to pile their money into non-interest yielding asset classes like precious metals.
You’ll find investors will take their money out of trust funds, savings and banks as the rates are less attractive. Instead they will allocate their money to more rewarding markets such as silver, gold, shares and even ETFs, which will drive the metals prices up.
And so precious metal bullions will look beyond to the central bank’s decisions on monetary policy throughout the rest of the year.
Whether the Fed decides to drop the interest rates by 0.25% or 0.50%, this will give a short-term boost to silver prices.
Which is exactly what we need as traders to profit from the rise.
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Why the charts are preparing for a huge silver rally
If we look at the daily silver chart, you can see that since June 2018, it formed a large breakout pattern known as a W Formation.
A W formation is a price pattern that resembles the letter W with two rounding bottoms and a horizontal neck line (Blue horizontal line).
With this W pattern - the ceiling level is at $16.66 which the silver’s price broke out of at the end of June 2019.
We can continue to expect the up momentum for the price of silver to continue which we can profit from.
To calculate the next price target, we’ll use the Top-Down formula.
This formula finds the price difference between the top and the bottom of the W formation and is added to the top of the formation.
Which in this case is:
Target = (Top - Down) + Top
= ($16.06 - $13.96) + $16.06
Two ways to profit from the 13% rise in silver
You can either buy Silver CFDs and hold them until it hits the target at $18.16.
Or you can wait for my SMS
as I look for companies that move up when silver does such as Anglo American, BHP Billiton, Kumba Iron Ore etc…
“Wisdom yields Wealth”
Analyst, Red Hot Storm Trader