Silver's `Brobdingnagian' Base Signals Rally to $36: Technical Analysis

Silver, up about 18 percent this year, may rally another 79 percent after breaking through a “Brobdingnagian” base, according to technical analysis by WJB Capital Group.

The metal for immediate delivery touched $20.15 today, approaching the March 2008 high of $21.35, which bookends a period of consolidation that began in September 1980, said John Roque, the managing director of WJB Capital. Prices have been mostly between $4 and $20 for the past three decades, he said. Today’s gain signals silver may add another $16, the difference between the top and the bottom of the range, Roque said.

A so-called base is formed when a security trades in a long-term price range. In Jonathan Swift’s “Gulliver’s Travels,” Brobdingnag was a land of giants.

“Brobdingnagian means big, monstrous, and silver’s base goes back 30 years and is reflective of this,” Roque said by telephone from New York. “The bigger the base, the bigger the potential for a tenured advanced.”

Silver for immediate delivery added 14.62 cents, or 0.7 percent, to $19.9287 an ounce at 2:29 p.m. in New York.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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