Silver has broken its month long range, but not the one that bulls were looking for:
Since mid December of 2022, the price of silver has just ranged between $23 to the downside and $24.50 to the upside. Bulls were watching for the breakout above $24.50. Instead, we broke and closed below $23 with a very strong red candle.
Silver bulls are now asking: where next?
From a technical analysis perspective, silver is now back at a major support zone. Let’s zoom out so you all see how major this zone is.
Above is the weekly chart of silver. I want you to look back to the left. You can clearly see that we are at a zone which has seen significant action going back to 2021. The $21.50-$22 zone has been a major flip zone. A fancy way of saying it has been both a reaction zone for support (price floor) and resistance (price ceiling). Multiple times.
Silver is back here now, and we could bottom and bounce. If we were to close below this zone, then the bears would have full control and silver would head lower to the $18 zone.
Going back to that daily chart and you will see how important the next few days are going to be. We are testing this key support right now. Bulls would want to see some sort of range develop here. It would mean that the selling pressure is exhausting and the bulls are coming back in control. This range doesn’t have to happen right now. Perhaps we head lower a bit deeper into this support zone before finally reversing. The key is to wait for multiple days of range before frontrunning a reversal.
From a technical perspective, this is just a pullback in a new uptrend.
But there is one chart I am watching which may have major ramifications for silver:
The US dollar has been beat up ever since breaking below support back in November 2022. There are many technical signs now pointing at a dollar reversal. A new uptrend. We had the breakout above 102.50. We even had the retest of this zone which saw the buyers step in as evident by the long wick candle on February 9th 2023. Everything looks bullish and a close above 104 confirms the first higher low in a new dollar uptrend.
With the dollar rising, it would impact silver and the other precious metals. We won’t get into the specifics on why the dollar is rising. There is a debate whether this dollar move is due to a hawkish Fed raising interest rates higher, or just a general risk off move due to recent geopolitical news.
For silver bulls, we would want to see the US dollar close back below 102.50 to strengthen the bull case. Alternatively, perhaps the dollar rises to 105 which results in one more leg lower on silver before we get our ranging and reversal.
I did say earlier that all metals are feeling the dollar move. Silver tends to follow gold, and gold does look like it can make one more leg lower. Gold closed below $1900, and the recent three days of gains were slapped down by a major red candle on February 9th 2023. Bears are likely shorting and placing their stop loss above $1890.