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Significant Selling Pressure as Multiple Support Levels Fail
During the decline there were several key potential support levels that failed, starting with a drop below the 20-Day MA last Thursday. Subsequently, a sharp decline below the 50-Day MA, two uptrend lines, and the 200-Day MA followed over the subsequent two days, including today. As discussed last week, there is the potential for an eventual test of support around the next lower trendline, since the two previous uptrend lines have failed, along with the long-term 200-Day MA trend indicator.
Rising Channel Suggest Further Downside
Since the 2022 bottom, the price of silver has been rising, and formed a large parallel trend channel. The current bearish correction shows a spike in volatility during a rapid decline to a 30-week low, reached today. Regardless of whether the lower trendline is eventually reached, the spike in volatility increases the chance that it might be.
Therefore, if silver rallies from Monday’s lows, it can be expected to eventually find resistance and turn back down. If for no other reason than there has been only one downswing so far. Given the wide price range of the past few days, potential upside for a rally also shows a wide potential price range. Support was seen today around the 78.6% Fibonacci retracement level at $28.21. That is close enough to the low to consider it as completed.
Initial Support Could Hold for a Rally
Monday’s high was $30.82, which essentially was a test of resistance around the 200-Day MA. That is also a bearish sign as resistance was confirmed around prior support. Nonetheless, the 200-Day MA is at $30.89, and it marks a potential resistance area during a bounce. Watch that price area along with the previous interim higher swing low at $30.81.
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