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The price of silver endured a brutal price crash earlier this week as the shiny metal fell towards the $26.00 support area after trading as high as $30.00 on Monday. The reversal was apparently triggered by the CME drastically increasingly margin requirements for silver traders.
One key aspect to remember is that the price of silver is still trading substantially higher on a two-week basis, and the recent price retrace basically helped close a massive price gap on the Monday market opening.
Other things to consider are the short-term and overall price trend. The short-term trend in silver is still bullish while the price holds above its 200-period moving average on the four-hour time frame, at $26.00. This means that despite the near $4.00 pullback, silver is actually still bullish in the short-term.
We also have to consider the overall price trend. Silver’s 200-day moving average is found around the $22.00, meaning that silver would need to sink by a further $4.50 from current levels to go into a bear market.
Going forward, a break above the $30.00 level would be a true statement of intent by silver bulls. Silver buyer have failed on numerous occasions to surpass the $30.00 benchmark level. Perhaps it is now the most important level on the silver chart.
The next few days are going to be crucial for the price of silver. Any hint of weakness under the $26.00 level and short-term selling is likely to dramatically increase. Alternatively, price stabilization around current levels could encourage the notion that a meaningful low is already in.
Something else to watch is the US dollar index. The greenback is starting to firm across the board and this could create headwinds for the price silver. Typically, when the US dollar index is trending higher the price of silver will go in the opposite direction.
Silver Sentiment Analysis
Market sentiment towards silver is surprisingly bullish at the moment. The ActivTrader market sentiment tool shows that 72 percent of traders are bullish towards silver at the moment, despite the huge price pullback.
This is slightly alarming, and it potentially means that silver traders do not believe that the shiny metal can continue to trade lower, due to the fact that many retail traders intend to push the silver higher over the coming weeks.
I would be very nervous towards taking a long silver position if the price continues to fall, and the crowd continue to remain so overly bullish towards the metal.
Source by ActivTrader.
Silver Technical Analysis
The daily time frame shows that a bullish a bullish price pattern was formed during the latest move towards $30.00. Infact, the pattern in question appears to be a second cup and handle pattern formation.
On the weekly time frame a cup and handle pattern has been building for some time, and continues to point towards the $60.00 level. This new cup and handle pattern has a slightly lower target of $40.00.
Source by ActivTrader.
In order for bulls to trigger both of these extremely bullish price patterns they need to move silver above the $30.00 level. This would explain why the $30.00 level has been such a sensitive price area over recent weeks and months.
