The fall below support near $26.50 is a break below a significant and well established support level. The next chart target is $19.40. Once this target is achieved traders will watch for a consolidation pattern to develop near $19.40. This may include a sideways movement near $19.40, or a rapid rebound and rally towards $26.50. This behavior is a rally in the environment of a downtrend. It has a low probability of developing into a new uptrend.

A fall below support near $19.40 has a downside target near $15.50. This is also a long term support level. A fall below $19.40 suggests that silver may trade in a narrow consolidation range between $15.50 and $19.40.

(Read More: The Level Gold Bulls Need to See )



This type of behavior offers some trading opportunities but more importantly it provides advance warning of the potential behavior in gold. The silver chart shows that traders who are wishing for a rise in the gold price will be disappointed. The silver downtrend has a high probability of continuing and gold will follow. There is a high probability of an extended period of sideways consolidation behavior following any move towards $19.40. There is a low probability of a new strong up trend to carry prices above $26.50.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests.

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