Silver Price Down, But Is It Out?
- Silver prices continue to get routed, making a clean break of the March low
- Oversold, could continue to become more oversold, however; risk/reward for fresh shorts unfavorable
- Looking to resistance levels or consolidation of losses as next opportunity to join a move towards the December low (or worse)
Are gold and silver in for more losses in Q2? See our quarterly forecasts to see what’s driving the precious metals space…
The other day we had this to say about the rout in silver prices: “A string of losses, or gains for that matter, is not an indication a run must end, nor does the magnitude of a price move act as a great signpost (silver has dropped over 10% the past 2+ weeks). But it does provide caution for those looking to chase the market lower, or those who want to protect profits.”
Perhaps in this unusual instance short-term ‘chasers’ were able to benefit from additional short-sales. But it would seem likely the most recent losses will be erased on a bounce; the past couple of days had that short-term ‘capitulatory’ feel to it. All metals, precious and industrial, have been receiving a lot of attention in the media for their recent swoon. Oil, too. We may be at an inflection with commodities which will lead to an oversold bounce, and nothing more. A view expressed the other day.
The lower-low beneath the March low makes ~16.84 our first spot of interest as resistance. Looking beyond there the July trend-line could come into play, but could be losing its influence. The broken January trend-line looks like a more reliable source of resistance. It’s possible we don’t see a sharp snap-back, silver just wobbles for a bit working off oversold conditions through time and not price. In this case, a bearish pattern of shorts could develop – triangle, bear-flag, etc – and we can work with that instead of looking to rejections from overhead levels. It’s a wait-and-see game from where we sit before looking to join any more weakness to the downside. If you’ve been short, perhaps a trailing stop would be fitting to protect profits.
In any event, whether there is a big bounce or a sideways meander, silver looks headed towards the December low at 15.65 (or worse); path to be determined. It’s all together possible it continues to v-line lower and hit the late-2016 low in the near future, but risk/reward for shorts at this juncture isn’t particularly attractive.
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---Written by Paul Robinson, Market Analyst
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