Silver (XAG) Forecast: Musk Warning or Profit-Taking Behind Silver Reversal?

Silver Plunges from Record $84.03 High as Sellers Overwhelm Late-Session Rally

Spot silver (XAGUSD) is sharply lower late Monday. After posting a record high at $84.03 early in the session, sellers hit the market hard, even driving it below Friday’s low. The market is now in a position to post a potentially bearish closing price reversal top.

At 20:23 GMT, XAG/USD is trading $72.87, down $6.44 or -8.12%.

Bearish Reversal Pattern Signals 2-3 Day Correction Could Target $64.79 to $60.25 Support Zone

A closing price reversal top is not a change in trend, but a shift in momentum that is often formed to alleviate some of the upside stress from an overextended market. If confirmed, it could trigger the start of a 2 to 3 day correction into the nearest retracement zone. In this case, a trade through Monday’s low will confirm the chart pattern, with $64.79 to $60.25 the first downside target and value zone.

Major Uptrend Remains Intact Despite Sharp Intraday Selloff

Even with a break of this magnitude, the trend will remain up because the major trend indicator bottom is at $45.55. Minor trend bottoms, which control the momentum, are at $60.80, $56.46, $48.64, and $46.88.

50-Day Moving Average at $55.80 Emerges as Critical Support Level

Another downside target and major trend indicator is the 50-day moving average at $55.80 today. This indicator was last tested on November 21 at $48.64, on November 4 at $46.88, and on October 28 at $45.55.

Overheated Market and Thin Holiday Volume Drive Technical Correction

The bullish fundamentals remain intact. This is just technical price action and the result of an overheated market and thin holiday volume. Nonetheless, it is recommended that you have an exit strategy in mind, or the market will dictate when you get out, and it is often not favorable.

Weak Longs Face Tough Decisions as Multiple Downside Targets Loom

Weak longs who think they can dollar-cost average and get away with it may have to rewrite their strategy if the closing price reversal top is confirmed. This is because there is plenty of room to the downside with no visible target until the 50% level at $64.79. The next target is the 61.8% level at $60.25, followed by the 50-day moving average at $55.80. Without a support cluster to lean on (a combination of retracement level and moving average), any of these price levels could turn into major support.

Elon Musk’s Warning About $80 Silver May Have Triggered Profit-Taking Avalanche

I’d like to blame the sell-off on profit-taking and end-of-the-year position-squaring and rebalancing, but there may have also been a “headline catalyst.”

On Friday, with prices soaring to nearly $80 per ounce, Elon Musk said this is “not a good thing” for industrial development. Perhaps his statement meant something, perhaps it did not. But the message I get is that people are watching silver, and this kind of price action draws a crowd. However, there isn’t room for everyone.

More Information in our Economic Calendar.