Silver (SLV) Breakout, Undervalued Compared to Gold

I have had several emails from subscribers concerning silver and my chart analysis.  I am quite bullish on silver and I have personally added onto some of my silver mining positions the past several days as I feel we could see an extremely volatile move upward in the silver price. 

When gold made its move above a $1000 an ounce in March of 2008 silver was outperforming gold and likewise during the deleveraging of the credit crisis silver underperformed gold.  Now that gold is hitting new highs I believe the percentage gains in silver could be much greater than gold.

I also wanted to show the special diamond formation which I highlighted in the chart.  The unique characteristic of silver is its volatility.  A diamond formation demonstrates the ebb and flow of excitement of the buyers and sellers.  Then the excitement wanes before the pattern is resolved.  Breakouts from diamonds is a trader’s best present.

As you can see from the point and figure that a break of the resistance downtrend line and the ascending triple top breakout leads me to believe that demand is outpacing supply.  I have been adding positions in select small cap silver mining stocks.