Signs of a bearish reversal
A bearish reversal is being signaled today, paving the way for a possible continuation of the larger bear trend, as outlined by the descending trend channel on the chart. Last Friday’s high of 30.66 left a bearish clue as it resisted the 50-Day MA. Subsequently, today’s price action confirmed the bearish implications as the 50-Day MA previously represented support and now marks potential resistance.
It is important to point out that the relationship with the 50-day line (C) is becoming increasingly bearish. Note that during the last test of resistance during the 50-Day MA in December, silver stayed above the line for a few days before turning lower again. This time it didn’t come out. The selling pressure was too great.
Downward trend in strength
Since the 50-day line closely parallels the upper downtrend line, essentially a test of resistance near that line may have been completed today before it could be specifically touched. If so, the price of silver is back in line with the larger downtrend pattern, indicating a possible end to the bullish counter-trend rally. A drop below the current low of 29.50 could lead to test support near the recent swing low (double bottom) at 28.90.
But given the potential bearish continuation of the downtrend channel, lower price levels could be hit before the correction is complete. Either way, there is a 78.6% retracement at 28.27, and the initial target of a descending ABCD pattern at 27.11. At the very least, a decisive drop below 28.90 also highlights the lower channel line as a potential support target.
For a look at all of today’s economic events, check out our economic calendar.