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The price of silver is starting to weaken below the $28.00 support level after the shiny metal recently posted a bearish double-top pattern, as buyers once again failed to break past the $28.50 resistance area.
A strong rejection in gold from the $1,915 level is also weighing on the price of silver. The two metals have a strong price correlation and often move and random together. Gold is often a major driver of moves in silver, meaning that silver may be following gold lower.
The positive fundamentals surrounding silver remain as strong as ever, so a pullback could provide a significant dip-buying opportunity for silver bulls. Any move towards the metals 200-day moving average, or even below the $27.00 level over the coming days could provide such an opportunity.
One of the major issues that silver faces right now is bullish sentiment. Typically, major and long-lasting rallies rarely take hold when the retail crown is overly bullish, due to the poor market timing of non-professional traders.
According to the ActivTrader Market Sentiment tool the bullish sentiment bias towards silver has remained consistent, with 83 percent of traders still predicting further upside for silver. Furthermore, bulls have been rigid in their view, as this one-way sentiment skew has been prevalent for close to one month.
As silver repeatedly struggles above the $28.00 level and sentiment remains at elevated levels, a potential red flag is currently being issued. Silver may need to go lower before it heads higher, meaning that a short squeeze could be in the making.
Overall, when sentiment starts to neutralize or indeed negative, I would feel more confident that a long-lasting rally in silver can take hold. I remain bullish towards the price of silver, however, with the current one-way sentiment it probably is not silver’s time to shine just yet.
Silver short-term Technical Analysis
The short-term technicals for silver show that a bearish double-top pattern has formed, following multiple technical rejections from the $28.50 price area. Double-top patterns are highly reliable bearish reversal patterns.
In terms of near-term price targets a rising trendline around the $27.00 area could be a potential pick-up zone. Again, the short-term technical show that the metal may need to go lower before it heads higher.
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Silver Medium-term Technical Analysis
The daily time frame shows that a large triangle pattern has formed. A major upside breakout will take place from the triangle pattern if bulls can take out the $29.10 resistance level.
In terms of medium to long-term technicals silver looks bullish. The metal is firmly above its 200-day moving average, and a bullish golden cross is still underway with the 50-day moving average crossing over the 200-day moving average.
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