Silver has performed very well over the past couple of weeks, especially considering the continued strength in the dollar. It has successfully tested the support of its long-term uptrend line and, having broken higher on Friday, is now in position to make a run at the resistance in the $8 area.

We can see recent action including Friday's breakout on the 6-month chart, and also how the RSI and MACD indicators are turning higher, indicating that silver is now well placed to advance swiftly.

On the 2-year chart we can see where the advance is likely to bog down, at least temporarily, at the top line of the large symmetrical triangle, above which there is the resistance near the former highs. Before an attempt can be made to break out above these highs, a period of consolidation is likely.

If the dollar now goes into retreat then clearly silver is well placed to advance swiftly, although at this point it must be emphasised that silver appears to be advancing for reasons of its own, namely a developing supply crunch, highlighted by the explosion in silver lease rates, see chart below. If the dollar continues to advance from here it is unlikely to do so at a great rate due to the strength of overhead resistance, and therefore silver is unlikely to break down below its long-term uptrend.

If silver succeeds in taking out the earlier highs, then the sky's the limit. The explosion in silver lease rates indicates that what a number of silver market commentators have been talking about for a long time, namely a developing severe supply crunch, may be about to become a reality. If it does then prices will go through the roof and silver stock prices will balloon. The action in the stocks on Friday was very positive indeed, signalling an end to their recent severe downtrends, with very big gains in stocks such as Silver Standard. This action points to a substantial rise in the price of silver going forward.