Will Silver Continue Higher Despite Short-Term Vulnerability?

Bruce Powers
Published: May 1, 2023, 20:59 GMT+00:00

Silver consolidates near recent lows and encounters short-term resistance, but underlying demand remains strong.

Silver, FX Empire

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Silver tried to trend higher today, reaching as high as 25.90 before encountering resistance that took it back down near session lows. This puts silver back near recent lows and vulnerable in the short term. Near-term support is at last week’s low of 24.47. As long as silver stays above that pullback low, it has a chance to continue higher.

Month Long Consolidation Close to Trend Highs

Silver has been consolidating in a range for a month following a rally to new trend highs at 26.07. A 23.6% Fibonacci retracement has been completed so far. This is a relatively shallow retracement following an aggressive 32% rally in only five weeks. It indicates strong underlying demand remaining in silver. In addition to the shallow retracement, support has held at prior resistance from the 24.62 swing high from January. All signs point higher for silver. It is a question of whether it goes higher before a deeper retracement comes first.

AB=CD Pattern Target

An AB=CD pattern completes up at a 26.84 target. The AB leg of the pattern advanced by 40.9% over 108 trading days. While the CD leg is in its 40th day. We are looking for a similar advance in the CD leg as was seen in the AB leg.

Silver Remains Long-Term Bullish

Silver broke out of a large declining parallel trend channel on April 4. That channel had been forming for around 26 months. The trendline break was of a line hit three times specifically and a couple times when price got close. In other words, the trendline was solid as it was identified by price at least three times. Only two touches are needed to draw a line. The decisiveness of the breakout then confirms its significance. The breakout was decisive with a long-range daily candle and strong close on breakout day. Plus, strength continued for another seven days before resistance was seen at 26.07.

The breakout is fresh as we are only now seeing the first retracement of note following the breakout. Upside potential exists as the rally before the descending channel occurred over 20 weeks, with silver advancing as much as 165.8% during that time. A similar move, calculated from the August 2022 swing low of 17.54, will complete in silver at 46.62.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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