Support Zone Holds After Sharp Selloff
Silver dipped to a new corrective low of $55.60 last Wednesday before consolidating near that low, signaling that selling pressure may be easing after a sharp decline. On Monday, silver consolidated inside Friday’s range of $55.70 to $59.58, leaving those two levels as key short-term support and resistance, respectively. Support is also indicated near the lows by the lower boundary of two falling trend channels, one that began recently and another that encompasses a longer timeframe.
Last week’s lows provided the second confirmation of support near the lower channel boundary of both channels. In addition, the 88.6% Fibonacci retracement level is near the lows at $54.23, along with prior resistance from the October highs at $54.49.
Counter-Trend Rally Faces Key Technical Barriers
Together, the above analysis suggests that silver is positioned for a possible counter-trend rally into resistance. Initial trend resistance for the short-term decline that followed the May swing high of $89.38 is near the 20-day moving average, currently around $65.97 and falling. That average takes on added importance because it is aligned with a downtrend line originating in June.
Silver fell below both the long-term uptrend line and the 200-day moving average earlier in June, levels that had provided dynamic trend support since March 2024. With the 20-day moving average now below those levels, a failed rally or resistance test near the 20-day average would further reinforce the bearish outlook. Following such a test, silver would be expected to continue weakening because of the breakout below those long-term trend support indicators. Of course, a bullish tone would begin to develop upon a successful reclaim of the 20-day moving average.
Breakout Clues May Reveal the Next Move
Despite the potential for a bounce, near-term resistance is first near the prior trend low of $61.51 and then at last Wednesday’s lower daily high of $62.38. A decisive rally above that high will trigger a bullish reversal. Also, notice that trading since Wednesday’s wide-range day has remained inside that day’s range, thereby increasing the significance of an eventual breakout above Wednesday’s high.
Since the long-term trend indicators, including the uptrend line and the 200-day moving average, were broken, further downside is suspected once meaningful resistance is encountered. There has been only one leg down following the break below those trend indicators, suggesting the bearish correction may not yet be complete. That raises the possibility of at least one more leg down after a bounce, bringing the analysis back to the current consolidation near support, where the next breakout or rejection should provide the clearest clue to silver’s next directional move.
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