Silver markets rallied on Wednesday to reach towards the $22.75 level. This is an area that has been resistance a couple of times over the last few days, and now it looks like we are trying to break out above there. If we can, then it is possible that we could go looking towards the 50 day EMA which is sitting at the $23.17 handle. This is a market that I think I will be looking to short, but I need to see the right exhaustive candle in order to get on that side of the trade.
To the downside, the $22 level makes a nice target, and it should be a certain amount of support based upon the fact that it has been important multiple times. Having said that, we even managed to break below there recently. The $21.50 level is an area that has been crucial support as well, so that is an area that I would be very interested in. If we were to somehow break down below that level, then it is likely that we could go looking towards the $20 level. The $20 level is crucial on longer-term charts as well, so it will be interesting to see if we break down to that area.
On the other hand, if we break above the 50 day EMA above, then the market is likely to go looking towards the 200 day EMA at the $24.16 level. Regardless, you should pay close attention to the US dollar, because it does have a strong negative correlation to the silver market. Silver tends to be very volatile to say the least, so I think it makes quite a bit of sense that you need to be cautious with your position size. This will be a very dangerous time a year to be messing around with what is a dangerous market to begin with, so with that being the case I think you should probably trade a much smaller position than usual, which is what I believe you should do in any market this time a year. Quite frankly, it is not until we get into the second week of January that things become somewhat normal from a liquidity standpoint.
