Silver initially rallied on Wednesday, but continues to see a lot of concern from external forces to cause issues.
Silver
Silver initially rallied during the trading session on Wednesday but has given back some of the gains as it continues to see a lot of volatility. All things being equal, it is worth noting that the $80 level has offered a certain amount of support and the fact that the 50-day EMA sits right there as well also helps out the entire situation.
The market continues to see a lot of volatility and with that, I think you probably will have to look at this as a market that is going to be very difficult to get your hands around at times and probably a situation where you have to keep your position size reasonable. The volatility means that you could have a lot of problems, but with that being said, I think you have to look at this still as a buy on the dip type of market.
Volatility as the Primary Market Obstacle
The market breaking below the $80 level opens up the possibility of a move to the $70 level which is the bottom of the recent consolidation. If we were to break down below there, then I think silver falls apart and really starts to drop significantly. On the other hand, if we break above the $90 level then we could test the highs again.
But quite frankly, silver is not a safety asset, so despite the fact that there’s a war on and some traders have been running to certain assets, silver has been left out in the cold. The US dollar had spiked recently and that of course is something worth paying attention to as well. The $100 level looms large in the market and as long as we cannot break above there, you have to assume that the choppiness will be a mainstay.
I do think that we’re trying to work off some of that recent fear and we do have to worry about the idea of whether or not the US dollar really starts to take off because if it does, that might be the death of the silver uptrend. We formed a massive swing high, a massive wipeout candle, and then rallied again only to wipe out the last couple of days. Clearly, volatility is going to be your biggest enemy here regardless of which direction you would choose to trade; you need to do so with a small position.