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Silver Price Decline Brings Long-term Levels into View

Silver Price Decline Brings Long-term Levels into View

Paul Robinson, Strategist

What’s inside:

  • Silver price on the verge of lower low from May towards December low, long-term trend-line
  • A number of resistance points on a bounce presents spot of interest for sellers
  • Thin holiday trade in U.S.; FOMC minutes tomorrow, U.S. jobs report on Friday

A week ago, when we last discussed silver prices we were looking for a potential rebound to continue following the spike and recovery on the “fat finger” trade in gold. At that time, we viewed taking out the spike-day low as our cue to abandon any type of bullish bias built-in off trend-line support extending higher from December of 2015 & 2016. Yesterday’s sell-off pushed silver through both the June 26 low, as well as the confluence of December trend-lines. With a little more selling we’ll see a lower low carve itself out from May. This could clear a path towards the December low at 15.64.

Whether a bounce develops here around the May low or following a drop below it, a run higher will quickly find silver in a thicket of resistance. The under-side of the broken December trend-lines, the spike-day low at 16.28, and the June trend-line all fall in a relatively small price zone of approximately 16.24/50. A bounce into this area and turn lower in momentum offers an attractive opportunity to join the path of least resistance and a move towards 15.64 or worse. Below the December low support will arrive in the vicinity of 14.90/55, horizontal levels from December 2015 to April 2016. Also in that area lies a very important long-term trend-line extending higher from 2003 under the 2008 and 2015 lows. A big test with big-picture ramifications could soon be upon us.

Looking higher from here, even if we are to see a strong push beyond noted resistance, silver will still have a lot of work to do to turn the general bias from bearish to bullish.

Short-term volatility could be on its way. Today is Independence Day in the U.S., so market participation is on the light-side with the major exchanges in the U.S. closed. The rest of the week could be an interesting one, though, with June FOMC minutes due out tomorrow and on Friday we have the June U.S. jobs report.

Silver: Daily

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---Written by Paul Robinson, Market Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.