The silver market rallied quite significantly on Wednesday, exploding to the upside as the US dollar got hammered. That being said, we are now starting to get relatively close to significant resistance, and it will be interesting to see how several hold up. By taking out the 50 day EMA, it is technically very strong, but you can see just a couple of weeks ago we did that multiple times. With that in mind, I am only somewhat impressed by this.
The $23.50 level is much more interesting to me, and if we can break out above it and continue going higher, that would be an extraordinarily bullish sign for silver, perhaps unlocking the possibility of a move towards the 200 day EMA above. To the downside, I think there are multiple areas that should continue to offer support, not the least of which would be the $23 level. Keep in mind that silver is very volatile so you need to be cautious with your position size, as we can have these massive moves only to turn around and fall apart right away.
That being said, it is worth noting that we closed at the very top of the range for the day, which is a very bullish sign. The area above is going to be very difficult, so you should keep that in the back of your mind just as a breakout would be that much more impressive. I anticipate that we will probably get a little bit of a pullback to offer value before we try to make that move, but you need to pay close attention to the US Dollar Index, as the dollar and silver are so negatively correlated to each other. In fact, the negative correlation between the US dollar and silver is much stronger than the US dollar and gold, despite the fact that most retail traders do not put that fact in their minds.
We have had a good run for the last four days in a row, which also suggests that we are going to have a bit of a pullback in order to try to continue the move that we have seen. The area between $22 and $21.50 continues to be a massive “floor in the market” from everything I see.
