Technical analysis shows that silver found support at the 50% retracement and the 200-4hour EMA, indicating a possible completion of the retracement.
Last week silver reached a high of 24.51, close enough to complete an ABCD pattern target at 24.57. The 50% retracement had already been completed at 24.39 and silver was back above its long-term downtrend line. Friday formed a bearish inverted hammer doji candlestick pattern, which led to today’s decline as silver broke below Friday’s low of 24.18.
Trend Structure Clearer on 4Hour Chart
If Today’s Low Exceeded, then Silver Falls to 61.8% Fibonacci
Nevertheless, a decisive drop below today’s low of 23.87 shows a failure of today’s support and increases the chance that silver declines to the next support zone, which is at the 61.8% Fibonacci retracement around 23.72. Pay attention to both the uptrend and downtrend line as they cross below Friday. To maintain the integrity of the developing uptrend structure silver should hold above support of the uptrend line on deeper pullback, and if broken then the downtrend line should hold. A decisive drop below either is a sign of weakness. The relationship with the uptrend line is less significant than the downtrend line however, given the longer time frame of the downtrend line.
Larger Picture Remains Bullish
Whenever the retracement is complete, assuming it occurs above the swing low of 23.40, silver should continue to progress its uptrend. First, it needs to match last week’s high of 24.51 but once exceeded to the upside silver will be heading towards the 127.2% Fibonacci extension of the of the current retracement at 24.69, followed by the 161.8% extension at 24.72. Of course, those price targets will come down slightly if the current retracement low changes as the Fibonacci extension tool will need to be redrawn.
The fact that silver is back above the long-term downtrend line after being below it for years is significant and is part of the larger bullish pattern now playing out. This means that weakness in silver should be relatively short lived as the larger bullish pattern further progresses.
