Originally published March 1st, 2009.

Silver has behaved pretty much as predicted in the last update, advancing further before breaking down sharply below the Bowl support line shown on the 1-year chart. However, we had expected a clear break above the resistance around the $14 level to lead to a swift run at the heavy resistance around and especially above the $16 level, and for it then to collapse back. In the event it staged a deceptive breakout above $14, when it looked like it had cleared this resistance, and then collapsed back to break down below the Bowl support.

Having broken down beneath the support of the bowl, silver is believed to have entered a reactive phase that is likely to see the price retreat back across the uptrend channel shown towards its lower boundary, and we should note that this retreat is likely to take a zigzag pattern and not be fooled by the brief rally that is likely to punctuate it.

Like gold, silver is thought likely to mark out a "Handle" consolidation pattern that complements the Cup or Bowl on its chart and leads eventually to renewed advance. This Handle consolidation will likely be bounded by the support level shown in the $12.50 area and the $14 resistance level. In regard to this a break below the lower boundary of the uptrend channel as the consolidation pattern develops will not be regarded as bearish, but a break below the support level would be. Successful completion of the Handle consolidation should lead to a serious assault on the major resistance level in the $16 - $17 area.