Breaking Down Silver’s Rally: Assessing Corrections, Retracements, and the Path Forward

Silver Forecast Video for 05.12.23 by Bruce Powers

After reaching a new trend high of 25.91 early in Monday’s trading session, silver reversed lower, generating a very wide outside day. At the time of this writing, the low of the day is 24.40 and today’s range is outside the trading range of the prior four days. The initial rally earlier today completed a rising extended ABCD pattern at 25.70. This is where the AB leg of the rally is extended by the Fibonacci ratio 127.2%, to define a target for the CD leg.

RSI Turns Down Following 25.91 Peak

Today’s low has almost completed a 38.2% Fibonacci retracement, which occurs at 24.36. Nevertheless, given today’s clear bearish reversal, at least so far, a test of support around the downtrend line looks very likely and possibly the previous swing high of 23.68. The Relative Strength Index (RSI) shows momentum turning down after being in overbought territory the past few days and points to a deeper retracement. You can see that last time the RSI showed a similar or higher overbought reading was back on the April 13, peak.

Monthly Breakout Triggered Last Friday

A monthly upside breakout was triggered on Friday and confirmed with a daily close above last month’s high of 25.27. Yet, today’s price action indicates that this current rally may be done for now, leading to further retracements or consolidation. Additional price levels to watch for possible support include last week’s low of 24.23, the 50% retracement level at 23.89, and the 61.8% Fibonacci retracement at 23.41, which matches the price level of the 200-Day MA.

Recent Bullish Improvements

Nonetheless, the relatively sharp advance off the recent swing low at 21.865 looks like a change in sentiment that may be in its early stages. The 20-Day MA recently crossed back above the 200-Day MA reflecting a strengthening trend. Further, an upside breakout above the short downtrend line has been confirmed over multiple days, which also confirms a breakout of a falling trend channel that starts from the May 2023 high.

Notice that today’s high in silver put it well above the long-term downtrend line (darker blue). It was the highest price relative to the downtrend line since silver first moved above the line earlier this year, on April 4. Once the current correction is complete, the stage is set for a continuation higher. Prior to the beginning of the correction begun in 2021, silver had risen by 165.8% in only 99 trading days. Its recent breakout opens the door to similar aggressive demand, as a possibility.

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